Carbon Border Adjustment Mechanism (CBAM)
Environment and Ecology > Miscellaneous > External sector
Why in news?
- The BASIC group, comprising India, China, Brazil and South Africa, issued a joined statement against Carbon Border Adjustment Mechanism, as it could result in market distortion and aggravate the trust deficit amongst Parties.
About Carbon Border Adjustment Mechanism (CBAM):
- Carbon Border Adjustment Mechanism (CBAM) is a proposed carbon tariff on carbon intensive products, such as cement and some electricity, imported by the European Union.
- Currently being legislated as part of the European Green Deal it is likely to take effect in 2026 with reporting starting in 2023.
- It is a set of trade policy tools that aim to prevent carbon-intensive economic activity from moving out of jurisdictions with relatively stringent climate policies and into those with relatively less stringent policies.
- Border adjustments have the potential to increase the environmental effectiveness of climate policies, by averting shifts in economic activity that could lead to higher total greenhouse emissions — a phenomenon known as “carbon leakage.” They are also seen as a way of protecting industrial competitiveness by reducing the incentive for businesses to move production abroad.
- Border adjustments would typically apply fees on imported goods based on the greenhouse gas emissions generated during their production.
- Border adjustments can also include rebates or exemptions from domestic policies for producers that export their goods.
Carbon Border Adjustment Mechanism (CBAM), recently seen in news, is associated with:
(b) European Union