The EU’s Carbon Border Adjustment Mechanism (CBAM) entered a trial phase on October 1st, requiring consumer goods importers to report their product carbon emissions. From 2026, CBAM will mandate importers to pay the carbon price difference between the EU Emissions Trading System (ETS) and the country of production.
The EU has the highest carbon price worldwide, currently at around €85 per tonne of CO2, and despite governments protesting and asking for extensions, the announcement of CBAM is incentivizing the creation of new carbon trading systems all over the world.
Here are some of the conversations this should spawn for corporate leaders:
- How would an EU-level carbon tax in all of our markets impact operations?
As regulators in many countries see domestic firms essentially paying a tax into EU coffers, they’ll realize that a local tax just re-directs that money into their own budgets. Leaders, commission your analytical teams to use product carbon estimates against the EU carbon price to quantify your exposure. - How does this change the business case for internal carbon pricing?
The EU’s move forces the economic costs of carbon into the market, and onto all its players (for an expanding universe of relevant products and industries). Firms that have struggled pushing an internal carbon price in the past will find the CBAM changing the dynamic of those conversations. Time to dust off the business case for internal carbon prices. - Is our product-level carbon data where it should be?
UK wind energy producers are worried over how CBAM will impact their price competitiveness in the EU, as their power’s dropped into undifferentiated energy for export. This example shows the risk of a lack of product-level carbon data specificity. Product carbon footprinting is the solution.
