What is CBAM?

Carbon Border Adjustment Mechanism (CBAM),is one of the instruments introduced by the European Union as part of its greenhouse gas emission reduction target. The main objective of the system is to provide an economic incentive to control greenhouse gas emissions, encouraging both governments and companies to engage in climate-friendly practices and investments.

Functioning of the Mechanism:

1. Identification: The first step is to identify imported products with high carbon intensity. These are usually products that consume significant amounts of energy in industrial production, e.g. steel, aluminium, cement.
2. Carbon Dioxide Equivalent Calculation: Methods based on international standards are used to calculate the carbon dioxide equivalents of the identified products. This is based on energy use and greenhouse gas emissions in the production process of the products.
3. Limit Determination: Based on the determined carbon intensity threshold value, the import limit to which the SDCC will apply is determined. This limit is usually determined according to the economic, industrial and environmental conditions of the country.
4. Implementation: Imports of products with carbon intensity above the set limit may be stopped or a specific tax or quota may be applied. This aims to encourage importers to favour products with low carbon intensity.
5. Impact Assessment: The impacts of the SDCC are regularly assessed. This is done to understand the economic, environmental and social impacts of the policy and to revise the policy if necessary.
6. International Relations: Countries implementing the SDCC should consider how the policy may affect international trade relations. Consultations and co-operation with other countries are important.
7. Driving Transformation and Innovation: By increasing the demand for low carbon intensity products, SKDM will stimulate transformation and innovation in the industry. transformation and investment in clean technologies. This leads to more sustainable production and accelerate the transition to consumption patterns.
These steps can help to reduce the carbon intensity of the SDCC, reduce greenhouse gas emissions explains how it works to promote mitigation and sustainable development.

Application Examples:
European Union: The European Union proposed SKDM in 2021. This specifically targets imports of high-carbon products such as steel, cement and fertiliser.
Canada: Canada is discussing a similar mechanism. This is intended to support Canada's own carbon pricing system and prevent carbon leakage.
United States of America: In the USA, policies similar to SKDM are being addressed especially in line with green energy and sustainability targets.
While the Borderline Carbon Regulation Mechanism (SKDM), plays an important role in combating global climate change, it also has major impacts on international trade. Implementation of this mechanism not only promotes the reduction of carbon emissions but also shapes the world trade structure.

Competitiveness and Market Order:

Protection of Local Producers: SKDM encourages local industries to invest in sustainability and green technologies by protecting local producers from competing with imported products with high carbon emissions.
Change in Market Order: Reflecting carbon costs on imported product prices may reduce the competitiveness of some imported products in the markets. This could impact consumer preferences and global supply chains.

International Trade Dynamics:

Trade Barriers and Disputes: SKDM can pose a potential trade barrier, especially for countries with carbon-intensive industries. This could lead to international trade disputes.
Preventing Carbon Leakage:SKDM helps prevent carbon leakage. This prevents companies from relocating to countries with lower environmental standards, contributing to reducing global carbon emissions.

Economic and Political Interactions:

International Cooperation and Disputes: SKDM can promote international cooperation. However, this mechanism may also cause some countries to react against their trade policies.
Impacts on Developing Countries: SKDM may create challenges, especially for developing countries. Because these countries often have lower environmental standards and lack the resources to reduce carbon emissions, this mechanism could limit their access to export markets.

Green Economy and Innovation Promotion: Carbon regulations increase demand for clean energy, green technologies and sustainable products. This increases job opportunities in green sectors and encourages innovation and R&D.
Investment and Employment Opportunities: Sustainability-oriented projects and infrastructure investments offer new opportunities for the business world. This contributes to the creation of new businesses and employment.
Carbon Pricing and Costs: Carbon regulations make carbon emissions costly. Since it reflects costs on carbon emissions, it may cause cost increases in sectors such as energy, production and transportation.
Competition and Trade Dynamics: Different countries have different carbon regulations, which can affect international trade dynamics. Some countries impose carbon limits on imports, while others may create trade barriers against such regulations.
Transition from Fossil Fuels to Clean Energy: Carbon regulations encourage the transition from fossil fuels to clean energy sources. This could reduce the value of fossil fuels while accelerating the transformation of the energy sector.
Price Increases and Consumer Impacts: Carbon regulations can increase energy and product prices. This can create economic pressure on consumers, but can also promote energy efficiency and sustainable consumption.