Carbon Border Adjustment Mechanism (CBAM) 

A trade policy tool designed to prevent carbon leakage (the geographical dislocation of emissions) by applying a carbon price on imported goods based on their embedded greenhouse gas (GHG) emissions. The CBAM ensures that foreign producers face similar carbon costs to those faced by domestic industries subject to carbon pricing regulations. This seeks to ‘level the playing field’ by disincentivising the import of foreign goods to circumvent carbon-related costs. 

 
Both the EU and the UK have announced plans to implement a CBAM. Regulations will come into effect in the EU in 2026 and a similar mechanism will come into force in the UK in 2027. 

Note: CBAM is one of the regulations within the scope of the EU Omnibus proposal. If adopted, the Omnibus would alter the parameters of CBAM in terms of applicability and implementation.