For residents of the European Union, the cost of their next vehicle, home improvements, and even local agricultural products may soon be influenced by a climate policy that is likely unfamiliar to many. This regulation, taking full effect on New Year's Day, extends beyond heavy industry to affect everyday goods now incurring an additional carbon cost upon entering Europe.
The carbon border adjustment mechanism (CBAM) is designed to impose a carbon price on numerous imported items, requiring EU-based importers to pay for the greenhouse gas emissions associated with producing certain carbon-intensive products.
If products originate from countries with less stringent climate regulations, the charges will be steeper. Manufacturers aiming to access the EU market will need to demonstrate that their products are not excessively carbon-intensive.
The initiative seeks to dissuade companies from relocating production to regions with lax regulations, thus promoting fair competition between EU and non-EU enterprises while fostering a global shift towards decarbonisation.
Following an initial phase, full financial requirements will be enforced starting January 1, 2026. Importers will be obligated to purchase CBAM certificates to account for emissions embedded in goods such as iron and steel, aluminium, cement, fertilisers, hydrogen, and eventually, electricity.
Although primarily an EU climate strategy, CBAM is poised to significantly impact global commerce. Nations reliant on exports to the EU may need to invest heavily in cleaner technologies and enhance emission tracking methodologies to retain market share. The UK intends to introduce a similar CBAM mechanism in 2027, though its relationship with the EU’s version remains undetermined.
A constructive shift is already visible: an increasing number of companies are now accurately measuring and reporting emissions, in response to the demand for dependable carbon data. Concurrently, more nations are adopting their carbon pricing systems, aligning with the EU to secure their export competitiveness.
Morocco stands out as a notable case: its 2025 financial legislation plans to introduce a carbon tax gradually from January 2026. With Moroccan companies paying a domestic carbon price, their exports may bypass additional CBAM fees at the EU border, thereby maintaining their competitive edge.