Reducing carbon emissions is critical in the fight against global warming and climate change. European Green Deal ambitious and ambitious targets were set and the road maps to be followed were framed. The most prominent among these targets is the "2050 carbon neutral" target. In order to achieve this target, customized policies are being developed to support and constrain carbon mitigation roadmaps.
In line with these objectives, the European Commission has implemented Carbon Border Adjustment Mechanism (CBAM) or SKDMCBAM aims to promote both environmental sustainability and fair trade by introducing a global cost element to carbon emissions. As a carbon pricing mechanism for imported carbon-intensive products, CBAM is recognized as a cornerstone of the European Green Deal.
So, what exactly is CBAM? Which sectors does it affect? How can companies adapt to this mechanism? In this article, we will look at how CBAM works, its link to the European Green Deal and its impact on business.
What is CBAM? Your Carbon Footprint is Breaking the Limits!
CBAM, Carbon Border Adjustment Mechanism, It is a policy instrument that aims to offset carbon emissions on a global scale, implemented by the European Union as part of the European Green Deal. This mechanism determines a cost element based on the carbon emissions of imported products. Its main objective is to ensure that producers adhere to and monitor their carbon targets more strictly in order to prevent the shift of production to regions with lower carbon costs, known as carbon leakage.
Developed in line with the EU's goal of carbon neutrality by 2050, CBAM stands out as an important tool that shapes not only trade policies but also the global sustainability agenda.
CBAM is focused on 6 distinct carbon intensive sectors, namely Cement, Iron and Steel, Aluminum, Fertilizer, Fertilizer, Electricity and Hydrogen to control carbon intensive production processes. Under CBAM, importers producing these products are required to purchase certificates corresponding to the carbon emissions of the imported products. The costs of these certificates are set in line with the EU Emissions Trading System (EU ETS) to create a level playing field between imported products and producers subject to carbon pricing within the EU. At the same time, if a carbon cost is paid in the producing country, this cost is deducted from the CBAM certificates to avoid double costing. CBAM is implemented through import control mechanisms at EU borders. Each Member State will establish local authorities responsible for the implementation and monitoring of the mechanism. A centralized digital system has also been developed to support CBAM processes across the EU.
CBAM follows a phased transition process to optimize the transition process. The period between 2023 and 2025 has been set as the pilot implementation period for CBAM and CBAM will be fully operational by 2026.
Pilot Period (2023-2025): This process was designed to identify the shortcomings of the mechanism and improve its applicability. CBAM reporting requirements were first introduced in this period. In the pilot period, importers have to regularly report information on the carbon emissions of products, but are not yet obliged to purchase certificates.
Full Implementation (2026): As of 2026, CBAM requires importers to purchase certificates for the carbon emissions of imported products through transparent carbon cost management.
CBAM Certification Process: Pricing Carbon
With the help of life cycle analysis, the certificate process is initiated by determining the carbon emissions generated during the production process of the imported product. In line with this calculation, the total carbon emissions of the imported products determine how much CBAM certificate the importer needs to purchase. The price of CBAM certificates is indexed to the carbon price in the EU ETS system. The carbon price in the EU ETS varies depending on market dynamics, so the cost of CBAM certificates can also fluctuate. These sepele CBAM certificates are valid for a certain period, not for a one-off purchase. Certificates purchased within the specified period are non-refundable and do not carry over to the next period. In this way, importers are encouraged to manage their carbon emission accounts regularly and transparently. At the same time, these calculations and the certificates purchased must be reported regularly. These reports are centrally collected and analyzed through a digital platform created by the EU. This platform enables traceability of both certificate purchases and carbon emissions. For access to the platform and a user guide, please visit the European Commission's official website you can visit.
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