Members of the European Parliament have approved the European Union’s Carbon Border Adjustment Mechanism (CBAM), which seeks to impose a carbon tariff on carbon-intensive products imported into Europe.

CBAM seeks to put a ‘fair price’ on the carbon emitted while producing carbon-intensive goods entering the EU and encourage cleaner industrial production in non-EU countries.

Several countries have opposed the EU’s carbon tariff measure for its ‘protectionist’ intent.

In March, both India and China expressed concern over CBAM at the World Trade Organization meeting. China suggested that the forum formally discuss the measure at its meeting in June.

The United Kingdom government recently opened a consultation on a range of potential policy measures, including a CBAM on the lines of the one proposed by the European Union.

In other decisions as part of the “Fit for 55 in 2030 package”, the EU Parliament also adopted the reform of the Emissions Trading System (ETS), including for aviation and maritime, and a new social climate fund.

The member states reached a deal on the reforms in December last year.

The goal of the ETS initiative is to cut greenhouse gas (GHG) emissions by a minimum of 55% by 2030 compared to 1990 levels, in accordance with the European Climate Law. The revised system is more ambitious, requiring a 62% reduction in GHG emissions in ETS sectors by 2030 relative to 2005 levels.

The EU Parliament also approved a deal with member states to create an EU Social Climate Fund (SCF) in 2026. The fund is aimed at ensuring that the transition to a low-carbon economy is equitable and socially inclusive, with vulnerable households, micro-enterprises, and transport users who are particularly affected by energy and transport poverty set to benefit.

The SCF will be funded by auctioning ETS II allowances up to €65 billion (~$71.2 billion), with an additional 25% covered by national resources, resulting in approximately €86.7 billion (~$95 billion) when fully implemented.

The Council must formally endorse the adopted legislation before being published in the EU Official Journal. The laws will come into force 20 days after publication.