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CBAM Scope and Future Trends
First Wave of CBAM: Which Sectors are Prioritized? Scope Selection Criteria and Roadmap
While the European Union's Border Carbon Adjustment Mechanism (CBAM) aims to put global trade on a green axis, a critical question is which products will be subject to this mechanism. So, which criteria were taken into consideration when determining the products covered by CBAM and how will this scope expand in the future?
How are CBAM Products Defined?
Two main criteria were taken into account when determining the products within the scope of CBAM:
- Trade Volume and Carbon Burden: The most important determinants were how large volumes of a product were sold into the European market (trade volume) and the total amount of emissions from the production process (carbon burden). Therefore, the products that Europe imports the most and whose production also causes high carbon emissions were prioritized.
- Carbon leakage risk: Taking into account its own internal dynamics, the European Union also prioritized products with a high risk of production shifting to countries with less stringent environmental rules, i.e. "carbon leakage risk".
In line with these criteria, products in five main sectors (iron and steel, cement, fertilizers, fertilizers, aluminum, electricity - hydrogen was later added) were initially included in the scope of CBAM.
Will the scope expand in the future?
Yes, the European Union has pledged that the current scope is just a start and that it will eventually extend CBAM to all products covered by the Emissions Trading System (ETS). Once the current transition and harmonization period (end 2023-2025) is completed, the number of products to be covered is expected to gradually increase. This means that all sectors will face this regulation sooner or later.
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