Report: CARBON BORDER ADJUSTMENT MECHANISM (CBAM)

Driving climate policy in the industrial sector is a particularly challenging task. Collectively accounting for around 22% of the EU’s annual greenhouse gas emissions, industry is key to achieving climate neutrality. However, the specific nature of this sector and the way some goods, such as steel or cement, are produced, involves process emissions resulting not from the combustion of fuels but from chemical reactions in the production of the good.

In recent years, emission reductions in the industry have been based mainly on energy efficiency improvements, feedstock additives, or the introduction of elements of a closed-loop economy. As the relatively more readily available ways to reduce their emissions have been exhausted, industry in many
sectors has reached a point where full decarbonisation means investing in low-carbon technologies. These require large investments and their maturity, both technologically and economically, is as yet uncertain, which translates into high investment risks that make financing such projects difficult.

The Carbon Border Adjustment Mechanism (hereafter CBAM), officially presented by the European Commission on 14 July 2021 as part of the Fit for 55 legislative package, is intended to be the answer to the growing need for regulatory pressure to reduce emissions in industry. CBAM is a proposal in line with the ‘green turn’ of the EU trade policy presented by us (Laskowski et al., 2022), which will have a very strong impact on industry in the European Union and the situation of Central and Eastern European producers. In this publication we will summarise the legislative progress of the CBAM regulation,
describe the diverging positions and the formation of a compromise, and explain what climate clubs
are and why they are important in the context of CBAM and in the next steps in the legislative process.