A carbon tariff or carbon border adjustment mechanism (CBAM) is an

eco-tariff An eco-tariff, also known as an environmental tariff, is a trade barrier for the purpose of reducing pollution and improving the environment. These trade barriers may take the form of import or export taxes on products that have a large carbon ...

embedded carbon One way of attributing greenhouse gas emissions is to measure the embedded emissions of goods that are being consumed (also referred to as "embodied emissions", "embodied carbon emissions", or "embodied carbon"). This is different from the quest ...

. In 2024 the United States said it is not a

carbon tax A carbon tax is a tax levied on the carbon emissions from producing goods and services. Carbon taxes are intended to make visible the hidden Social cost of carbon, social costs of carbon emissions. They are designed to reduce greenhouse gas emis ...

, but the

World Trade Organization The World Trade Organization (WTO) is an intergovernmental organization headquartered in Geneva, Switzerland that regulates and facilitates international trade. Governments use the organization to establish, revise, and enforce the rules that g ...

has not come to a conclusion. One aim to prevent

carbon leakage Carbon leakage is a concept to quantify an increase in greenhouse gas emissions in one country as a result of an emissions reduction by a second country with stricter climate change mitigation policies. Carbon leakage is one type of spill-over ef ...

from nations without a

carbon price Carbon pricing (or pricing) is a method for governments to mitigate climate change, in which a monetary cost is applied to greenhouse gas emissions. This is done to encourage polluters to reduce fossil fuel combustion, the main driver of climat ...

. Examples of imports which are high-carbon and so may be subject to a carbon tariff are electricity generated by

coal-fired power stations A coal-fired power station or coal power plant is a thermal power station which burns coal to generate electricity. Worldwide there are about 2,500 coal-fired power stations, on average Nameplate capacity, capable of generating a gigawatts, ...

, iron and steel from

blast furnaces A blast furnace is a type of metallurgical furnace used for smelting to produce industrial metals, generally pig iron, but also others such as lead or copper. ''Blast'' refers to the combustion air being supplied above atmospheric pressure. In a ...

, and fertilizer from the

Haber process The Haber process, also called the Haber–Bosch process, is the main industrial procedure for the ammonia production, production of ammonia. It converts atmospheric nitrogen (N2) to ammonia (NH3) by a reaction with hydrogen (H2) using finely di ...

Existing and forthcoming

European Union

United Kingdom

California

References