CBAM (Syllabus: GS Paper 3 – Env and Eco)

Context: The Ministry of Steel recently organized a Chintan Shivir focusing on the themes of Carbon Border Adjustment Mechanism and the utilization of Artificial Intelligence in the Steel Sector.

Carbon Border Adjustment Mechanism (CBAM)

• About: It is a tariff on imports that is calculated based on the carbon emissions associated with the production of the imported product.
• CBAM is a component of the "Fit for 55 in 2030 package," which is the European Union's initiative to reduce greenhouse gas emissions by a minimum of 55% by 2030 in comparison to 1990 levels.
• Dual Purpose: it serves as a financial disincentive for carbon emissions and influences production and export activities.
• The CBAM is scheduled to commence its transitional phase on 1 October 2023, with the permanent system set to become effective on 1 January 2026.

Benefits of CBAM

• Reduction in Carbon Leakage: CBAM aims to prevent the relocation of industries to countries with weaker climate policies, thus reducing carbon leakage and maintaining global emission reduction efforts.
• Encouraging Global Climate Action: By imposing carbon pricing on imported goods. 
• Revenue Generation: CBAM has the potential to generate revenue for the implementing country, which can be used for climate financing, supporting domestic industries, or investing in clean technologies.