Proposal for a Carbon Border Adjustment Mechanism expected in June

This mechanism should ensure that imports of carbon-intensive materials from third countries, with less environmental obligations than the EU, pay an amount similar to the EU carbon price.

The aim of the CBAM is to reduce the risk of “carbon leakage”. Risk of carbon leakage means either that production is transferred from the EU to third countries with less environmental commitments than the EU, or that the EU products are replaced by more carbon-intensive imports. If imports of carbon-intensive materials from third countries pay an amount equivalent to their carbon content, production relocations outside the EU should be avoided.

It is not yet known which sectors will be included in the CBAM, though rumors indicate that steel and other carbon-intensive industries will be probably impacted. Likewise, we do not know which measure the CBAM will consist of; it may be a tariff, a tax or even a system similar to the EU Emission Trading Scheme (ETS), the carbon market of the energy-intensive industries.

The European Commission will present its proposal in June 2021 with the goal of enforcing the CBAM in 2023. CECE will follow the process leading to the Commission’s proposal for a CBAM. The main concern from the perspective of the construction equipment industry is that the CBAM will make steel more expensive in a moment in which the prices are hitting record levels.