1.What CBAM is and why it exists

CBAM prices the greenhouse gas emissions embedded in certain goods imported into the EU. Its aim is to stop "carbon leakage", meaning production moving out of the EU to avoid carbon costs.

EU producers pay for their emissions under the EU Emissions Trading System (EU ETS). CBAM applies the same logic to imports: the EU importer buys CBAM certificates, priced like EU ETS allowances, for the emissions in the goods.

CBAM also gradually replaces the free allowances EU producers in these sectors receive. From 2026 to 2033 free allocation is phased out while CBAM is phased in; from 2034 emissions are fully covered by CBAM. That is why the certificate count is reduced by a "free allocation adjustment" (see S3).

Sources: REG Art 1(1)-(3); G1 §2.1 p.6-7, Table 2-2 p.10; QA §1.3 p.10.