The EU’s recently-agreed carbon border adjustment mechanism is that rare innovation, a levy that levels the playing field and has a lot more going for it too.
It is easy to see why CBAM, as it is catchily known, is so attractive for Europe. The continent’s companies pay a high price for CO₂ they emit above key thresholds — some €85 per ton. That encourages them to adopt clean technologies. But it also adds to the cost of goods produced in Europe, layering around 20 per cent on each ton of domestically-produced steel, for instance.
The CBAM is designed to tax imports of steel and other carbon-intensive products, mirroring European production costs. That should stop “carbon leakage”, where output moves elsewhere and employment in Europe takes a hit.