What is carbon leakage? How will the new policy affect trade between India and the EU? Story so far: On May 10, co-legislators in the European Commission signed the Carbon Border Adjustment Mechanism (CBAM). It was described as an "indicative tool" to set "a fair price on the carbon emitted during the production of carbon-intensive goods entering the EU and to promote cleaner industrial production in non-EU countries". The reporting system under the regulation would apply from 1 October for certain goods to facilitate smooth implementation and dialogue with third countries. Importers would start paying the financial levy from 2026. Its main objective is to prevent "carbon leakage". It refers to the phenomenon when a producer in the EU moves carbon-intensive production to countries outside the region with less strict climate policies. In other words, to replace products produced in the EU with imports with a higher carbon content. (Saptaparno Ghosh, The Hindu)