Carbon Border Adjustment Mechanism (CBAM) Tests

Climate change is a very serious global problem that requires global solutions. The European Union is trying to raise its own climate target. However, as long as less stringent climate policies apply in many non-member countries, there is a risk of carbon leakage. Carbon leakage occurs when European Union-based companies move their carbon-intensive production to other countries with less stringent climate policies or when European Union products are replaced by more carbon-intensive imports.

The carbon border adjustment mechanism (CBAM), implemented in European Union countries, is a system to put a fair price on carbon emitted during the production of carbon-intensive goods entering the union countries and to promote cleaner industrial production in non-union countries. By verifying that a price is paid for the embodied carbon emissions produced in the production of certain goods imported into the union, this system ensures that the carbon price of imports is equivalent to the carbon price of domestic production and that the union's climate targets are not undermined. CBAM is designed to comply with World Trade Organization rules.

This system, which is currently in its transition phase, will be put into full effect as of 2026. On the other hand, the gradual introduction of CBAM is in line with the phasing out of free allowances under the EU emissions trading system in order to support the decarbonisation of the union's industry.

In short, the carbon border adjustment mechanism (CBAM) is a policy that charges fees for imported goods depending on how much climate pollution is created by producing them. This system is always paired with carbon prices that tax domestic goods due to climate pollution.

With the carbon border adjustment mechanism (CBAM), products that emit a lot of carbon are made more expensive, and buyers are encouraged to find cleaner alternatives and manufacturers are encouraged to produce them. But countries that have introduced carbon prices face a problem. The price is valid only for its own citizens and producers. Climate-polluting goods from other countries gain an unfair advantage that can harm domestic industries. This can also cause carbon leakage, which causes buyers to purchase untaxed climate polluting products from abroad rather than seeking clean products. CBAM addresses this imbalance by adding a fee on imported goods equal to the domestic carbon fee.

However, there is a way for exporters to escape this system. If the exporting country has its own carbon price, then the CBAM is reduced only to cover the difference between the two prices. This avoids double taxation of carbon emissions. It also has the effect of encouraging other countries to implement their own carbon prices.

The world's first CBAM was launched by the European Union in October 2023, and already countries including Turkey, Indonesia, Vietnam and Thailand have begun to consider their own carbon prices, especially to avoid the European CBAM.

Meanwhile, CBAM, like carbon prices, is a simple and straightforward way to reduce carbon emissions in theory but can have quirks and inefficiencies in practice. One of the challenges is accurately measuring the carbon emissions that need to be paid for. The problem is particularly difficult for CBAMs because carbon emissions occur abroad and regulators must strive to control them.

The aim of the carbon border adjustment mechanism is to accelerate the decarbonisation of European industries while preventing carbon leakage, which occurs when businesses shift their production to countries with weaker climate regulations to avoid higher carbon costs.

Among the numerous testing, measurement, analysis and evaluation studies it provides for businesses in various sectors, our organization also provides carbon border adjustment mechanism (CBAM) testing services with its trained and expert staff and advanced technological equipment.