Third-Country Accounting for Carbon Pricing Concerning the EU Carbon Border Adjustment Mechanism

Being a Carbon Border Adjustment Mechanism in Agile Advisors, through pricing signals on the EU ETS, the CBAM supports the EU's efforts to decarbonize its domestic industry. The risk of carbon leakage increases as higher EU ETS prices are required to indicate to a sector that decarbonization of production processes is necessary. The price signals that the ETS is intended to transmit to producers that create a lot of carbon dioxide are neutralized when allowances are freely distributed to protect the EU industry. Note 9. Instead, the CBAM would enable the decarbonization of the EU and the international manufacturing sector by equating the carbon costs of exporters and local manufacturers. Understanding the CBAM's structure, particularly the computation of emissions embedded in imported goods, is crucial to grasp the intricacies of the carbon price crediting mechanism.