The EU Carbon Border Adjustment Mechanism ("CBAM") was established by the CBAM Regulation (EU) 2023/956 ("CBAM Regulation"), which entered into force in May 2023. It is a carbon tariff system introduced as part of the EU's aim to reduce by 2030 greenhouse gas emissions by at least 55 %.

Although CBAM is not the first and only mechanism aimed at reducing emissions, it was specifically designed to respond to the carbon leakage that occurs when companies looking to cut costs move production to countries with less stringent climate policies. As a result, products from the EU are replaced by products from third countries, which are cheaper, but also more carbon intensive. (Srđana Petronijević, Nina Rašljanin, more at lexology.com)