Posts by Francesco Bernabeu Fornara

As an integral part of the European Green Deal, the EU’s Carbon Border Adjustment Mechanism, or CBAM, is in its essence a carbon tax on imported products coming into the EU. The policy aims to prevent so-called ‘carbon leakage’: a circumstance wherein strict climate policies in one economy (like the EU’s) incentivises polluting businesses to relocate to other countries with less ambitious environmental regulations. By imposing a carbon tax on foreign businesses whose goods are sold in the European market, CBAM intends to encourage cleaner industrial practices in non-EU countries. In doing so, CBAM also sets a level playing field for European businesses by preventing competing foreign firms from circumventing the EU’s domestic equivalent carbon tax, the Emissions Trading System (ETS).