The European Council and Parliament have reached a provisional agreement on the Carbon Border Adjustment Mechanism (CBAM).

The agreement is only the first step for the implementation of the new system aimed at preventing or limiting imports of carbon-intensive products into Europe, as domestic producers continue their path to reduce carbon emissions.

The provisional agreement stipulates that steel and iron products will be included in CBAM, Kallanish notes.

It has been decided the system will be launched from October 2023, initially with reporting obligations only. The full implementation of CBAM will then occur in line with the phasing out of allocations of free ETS allowances, though a timeline for this is still being negotiated.

Finally, the provisional agreement explains that further work still needs to be done to address issues related to exports.

European steelmakers support the will of the European Commission to implement a system aimed at controlling carbon-leakage from imports, but have warned that an acceleration of the phasing-out of free ETS allocations could hurt the industry significantly.