The European Union will soon regulate the carbon border adjustment mechanism (CBAM) through which imported products must pay the difference between the price of carbon paid in the country of production and the price of carbon permits in the European Union Emissions Trading System.

The measure aims to ensure that the European Union's efforts on climate-related issues are not undermined by the transfer of production from the bloc's countries to countries with less stringent climate policies.

Among the products subject to the measure are iron and steel, cement, aluminum, fertilizers and electricity, hydrogen, indirect emissions under certain conditions, and some derivative products such as screws and bolts and similar articles of iron or steel. The European Commission may add other products to the list, such as organic chemicals and polymers.

The CBAM rules will be effective from October 1, 2023 and fines will be gradually introduced between 2026 and 2034. There will be a three-year transition period in which the importer's obligations will be limited to reporting.