How CBAM can become a steppingstone towards carbon pricing globally

Abstract

Following the introduction of the EU’s Carbon Border Adjustment Mechanism (CBAM), this policy brief considers issues relating to its implementation, in particular the possibility to reduce CBAM liability if a carbon price has already been paid in the country of origin of the goods. This provision is designed to incentivise the use of carbon pricing across the world. However, the legal text leaves room for interpretation and the EU will have to clarify these issues further in the coming months. This offers a golden opportunity to encourage carbon pricing in third countries, whether regulatory or non-regulatory, and thereby strengthen global action to address climate change.