Residents of the European Union may soon notice changes in the price of cars, home renovations, and even local produce, due to the implementation of a climate policy unfamiliar to many. This regulation, effective fully from New Year's Day, extends beyond heavy industry to everyday goods, introducing a new carbon cost for items entering Europe.
The carbon border adjustment mechanism (CBAM) assigns a carbon price to several imported goods. EU-based importers will be responsible for covering the greenhouse gas emissions associated with the production of certain carbon-intensive materials.
Imports from nations with less stringent climate regulations will incur higher charges, pressing producers to demonstrate that their products are not excessively carbon-intensive to access the EU market.
This move aims to prevent the relocation of production to countries with more lenient rules, promote fair competition between EU and non-EU businesses, and encourage global efforts to reduce emissions.
After a trial period, full compliance will be required by January 1, 2026. At this point, importers must purchase CBAM certificates to account for the embedded emissions in goods like iron and steel, aluminum, cement, fertilizers, hydrogen, and eventually electricity.
Although CBAM is an EU-centered climate initiative, it is likely to transform global trade. Countries reliant on EU exports might need to make significant investments in cleaner technologies and improved emissions tracking to maintain market presence. The UK has declared plans to implement its own CBAM version in 2027, with its alignment to the EU's yet to be finalized.
A shift towards positive change is underway, with increasing numbers of companies methodically measuring and disclosing their emissions in response to the growing emphasis on reliable carbon data. Concurrently, more nations are adopting carbon pricing systems to align with the EU and protect export competitiveness.
Morocco exemplifies this trend; its 2025 finance legislation proposes a gradual introduction of a carbon tax from January 2026. Thanks to this domestic carbon pricing, Moroccan exports to the EU are likely to escape additional CBAM fees, supporting their competitive edge.