What is SKDM and how does it work? The Carbon Border Adjustment Mechanism (CBAM) is a trade regulation aimed at reducing carbon emissions. Therefore, it has been developed by the European Union as part of its efforts to combat global climate change. Additionally, it aims to prevent carbon leakage and ensure fair competition. In this case, imported products with high carbon emissions will be subject to additional costs. Specifically, sectors such as steel, cement, aluminum, and fertilizers fall within the scope of this mechanism. This way, carbon-intensive production processes are being made more sustainable. At the same time, companies engaged in low-carbon production will gain a competitive advantage. What is SKDM and how does it work? For this reason, exporters have begun shifting toward green transformation processes. Moreover, under CBAM, carbon emissions reporting has become mandatory. In this case, companies must document their production processes transparently.

Table of Contents

• When Will CBAM Be Implemented?
• Which Sectors Are Prioritized Under CBAM?
• Which Sectors Are Covered by CBAM?
• What Are the Steps of the CBAM Process?
• CBAM Pricing Principles
• Conclusion
• Frequently Asked Questions

When Will CBAM Be Implemented?

The Carbon Border Adjustment Mechanism (CBAM) is being implemented in phases. Therefore, the European Union launched the first phase on October 1, 2023. Additionally, during this period, businesses are required to report their carbon emissions. In this case, companies must document emissions from their production processes. Specifically, by 2026, the full implementation process will come into effect. This way, importers exceeding the set carbon limits will have to pay additional taxes. At the same time, companies engaged in low-carbon production will gain an advantage. For this reason, exporting companies should start focusing on compliance processes now. Moreover, carbon footprint calculations are becoming mandatory. In this case, industrial producers must shift toward sustainable technologies. Particularly, investments in energy efficiency should be prioritized. Additionally, companies that fail to comply with CBAM will face extra costs.

Which Sectors Are Prioritized Under CBAM?

The Carbon Border Adjustment Mechanism (CBAM) targets sectors with high carbon emissions. Therefore, industrial and energy-intensive sectors have been prioritized under this regulation. Additionally, to prevent carbon leakage, certain industries will face additional costs. In this case, businesses engaged in carbon-intensive production must comply with the new regulations. Specifically, the iron and steel sector is one of the most critical areas covered by CBAM. This way, industrial carbon emissions will be controlled, with cement production as a key sector. Reducing construction industry emissions remains a major goal. The aluminum sector faces regulation due to its carbon-intensive processes, requiring more sustainable methods. Fertilizer, hydrogen, and electricity production, as energy-intensive industries, are also subject to new regulations.

Which Sectors Are Covered by CBAM?

The Carbon Border Adjustment Mechanism (CBAM) targets sectors with high carbon emissions. Therefore, industrial and energy-intensive sectors are subject to this regulation. Additionally, to prevent carbon leakage, certain industries will face additional costs. In this case, businesses engaged in carbon-intensive production must comply with the new regulations. Specifically, the iron and steel sector is one of the most critical areas covered by CBAM. This way, carbon emissions in heavy industry will be brought under control. At the same time, cement production is among the key sectors included in the mechanism. For this reason, environmentally friendly production is being encouraged in the construction industry. Moreover, the aluminum sector is also included in CBAM due to its carbon-intensive processes. In this case, producers must shift toward sustainable technologies.

What Are the Steps of the CBAM Process?

The Carbon Border Adjustment Mechanism (CBAM) is implemented through specific steps. Therefore, the first phase begins with the calculation of carbon emissions. Additionally, importers are required to be included in the emissions reporting system. In this case, products with high carbon emissions are evaluated based on predefined criteria. Specifically, businesses exporting to the European Union must comply with these regulations. This way, carbon emissions data is reported transparently. At the same time, additional costs are applied to carbon-intensive products. For this reason, businesses engaged in low-carbon production will gain an advantage. Moreover, companies exceeding the set carbon limits will have to pay additional carbon taxes. In this case, transitioning to sustainable production processes becomes crucial. Particularly, the use of renewable energy is encouraged and supported.

CBAM Pricing Principles

The Carbon Border Adjustment Mechanism (CBAM) is based on specific pricing principles. Therefore, the cost of imported products is calculated based on their carbon emissions. Additionally, the carbon intensity of each product is subject to different tax rates. In this case, businesses engaged in low-carbon production will gain a cost advantage. Specifically, products with high emission values will be subject to higher taxes. This way, producers who reduce carbon emissions will gain a competitive advantage. At the same time, carbon taxes are updated based on international market prices. For this reason, manufacturers must continuously adopt low-carbon production strategies. Moreover, the carbon pricing mechanism is implemented through a transparent calculation system. In this case, companies are required to report their carbon footprint.

Conclusion

The Carbon Border Adjustment Mechanism (CBAM) is a crucial regulation aimed at reducing carbon emissions in global trade. What is CBAM, and how does it work? This mechanism directs industrial sectors toward low-carbon production while ensuring fair competition. Additionally, businesses engaged in sustainable production gain a competitive advantage. What is CBAM, and how does it work? It is a system that evaluates the carbon footprint of imported products and imposes additional taxes on high-emission goods. In this case, carbon taxes and reporting processes have become critical for all exporters. Specifically, businesses engaged in eco-friendly production will establish a stronger position in international markets. What is CBAM, and how does it work? Companies that adapt early to the green transition will gain a significant advantage and ensure long-term sustainability.

Frequently Asked Questions

What is CBAM? CBAM is a regulation aimed at reducing carbon emissions and preventing carbon leakage.

Which countries are implementing CBAM? CBAM was initiated by the European Union, and other countries may adopt it in the future.

What is the purpose of CBAM? It aims to reduce carbon emissions in industries, encourage eco-friendly production, and prevent carbon leakage.

Which sectors are covered by CBAM? CBAM applies to carbon-intensive sectors such as steel, cement, aluminum, fertilizers, and electricity.

When will CBAM be implemented? The first phase of CBAM began on October 1, 2023, with full implementation planned for 2026.

What are the global policies related to carbon footprint? Agreements like the Paris Climate Agreement, the European Green Deal, and CBAM aim to reduce carbon emissions.

What should companies do to comply with CBAM? They must report their carbon footprint, adopt low-emission production processes, and improve energy efficiency.

How does CBAM impact exports? Companies exporting to the EU may face additional costs depending on their carbon emissions.

Can companies avoid CBAM? No, firms must reduce their carbon emissions or obtain carbon-neutral certifications to comply.

What is the relationship between CBAM and the European Green Deal? CBAM is part of the European Green Deal and supports the goal of achieving carbon neutrality.