Highlight 10/2026: CBAM 2026: the EU puts a price on carbon at its borders: climate governance or regulated protectionism?
Louise de Bruyne, 23 March 2026
Since 1 January 2026, the European Union’s Carbon Border Adjustment Mechanism (CBAM) has entered its definitive phase. According to the European Commission, the system is now fully operational, requiring importers of certain carbon-intensive goods to be registered as “authorized CBAM declarants” before placing goods under free circulation in the EU.
Covering sectors such as steel, cement, aluminum, fertilizers, electricity, and hydrogen, the mechanism obliges importers to purchase CBAM certificates reflecting the carbon price paid by EU producers under the Emissions Trading System (ETS). Far from being a purely environmental measure, CBAM represents a significant act of external governance: it links climate ambition to customs procedures and international trade flows. The central question is whether CBAM constitutes a legitimate instrument of climate governance or a sophisticated form of regulated protectionism.
The logic of CBAM is grounded in the prevention of “carbon leakage.” If European producers face high carbon costs under the ETS, production may shift to jurisdictions with laxer environmental standards, resulting in no real reduction in global emissions. By applying an equivalent carbon price to imports, the EU seeks to create symmetry between domestic and foreign producers.
This legal architecture is based on Regulation (EU) 2023/956, adopted in May 2023, which structured a transitional reporting phase beginning on 1 October 2023 and full financial implementation as of 1 January 2026. The Commission’s first operational assessment, published in mid-January 2026, provides data on authorized declarants, volumes declared, and countries of origin. These figures mark a shift from abstract regulatory design to measurable governance in practice. The credibility of CBAM now depends on reliable emissions data, uniform enforcement across Member States, and effective integration into customs systems. In this sense, CBAM reflects a rules-based attempt to green globalization by embedding climate objectives into trade regulation.
Yet CBAM also activates the principles and constraints of international trade law. Because it affects imported goods directly, it must comply with World Trade Organization (WTO) obligations, particularly the principles of non-discrimination and national treatment. In May 2025, Russia initiated WTO dispute proceedings, formally challenging the compatibility of the EU’s carbon border adjustment and emissions trading system with WTO agreements. This dispute highlights the legal and geopolitical sensitivity of the mechanism.
At the diplomatic level, tensions have also emerged in trade negotiations. In January 2026, Reuters reported that in discussions with India, the EU confirmed that CBAM would remain intact in the context of the EU–India trade agreement and that it could not grant preferential treatment to specific partners without undermining the system’s design. Such positions reinforce the EU’s claim of equal treatment but simultaneously fuel perceptions of rigidity.
The definitive implementation of CBAM in 2026 therefore marks a decisive moment in global climate governance. By placing a carbon price at its borders, the EU extends its internal climate policy beyond its territory, shaping international production and trade incentives. Whether CBAM becomes a model for climate-trade integration or a catalyst for fragmentation will depend on its legal defensibility, proportionality, and administrative feasibility. If it demonstrates transparency and non-discrimination in practice, it may consolidate a new standard of climate governance. If not, it risks reinforcing accusations of disguised protectionism and intensifying trade disputes in an already fragile multilateral system.
Louise de Bruyne, Highlight 10/2026: CBAM 2026: the EU puts a price on carbon at its borders: climate governance or regulated protectionism?, 23 March 2026, available at www.meig.ch
The views expressed in the MEIG Highlights are personal to the authors and neither reflect the positions of the MEIG Programme nor those of the University of Geneva