Carbon Border Adjustment Mechanism (CBAM)

Why in news?

• The co-legislators at the European Commission signed the Carbon Border Adjustment Mechanism (CBAM).

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.

Significance:

• 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.

PRACTICE QUESTION:

Border Adjustment Mechanism (CBAM), recently seen in news, is associated with:

(a) BRICS

(b) European Union

(c) ASEAN

(d) SCO

Answer