economy

January 1, 2026

EU’s new ‘green tariff’ rules on high-carbon goods come into force

The ‘border adjustment mechanism’ aims to create a level playing field while also encouraging decarbonisation

EU’s new ‘green tariff’ rules on high-carbon goods come into force

TL;DR

  • The EU's Carbon Border Adjustment Mechanism (CBAM) has been implemented.
  • Companies importing high-carbon goods must demonstrate compliance with low-carbon regulations or face fines.
  • The CBAM aims to create a level playing field and prevent 'carbon leakage'.
  • Initial sectors covered include iron and steel, aluminium, cement, hydrogen, electricity, and fertilisers.
  • Lack of clarity on application and a failed UK deal could cause early confusion.
  • Protests have come from China, the US, Australia, and others.
  • The UK plans to introduce its own CBAM next year.
  • Some EU industries fear higher prices due to the removal of free allowances.
  • Experts suggest the initial impact on prices and the economy may be mild.
  • The scope of CBAM is planned to expand to include products using steel and aluminium from 2028.
  • The UK is seeking a carbon linking agreement with the EU to exempt British businesses from export charges.

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