In 2005, the EU implemented the world’s largest carbon-pricing system – the emissions trading system (ETS). While pricing emissions can encourage industrial decarbonization, they also give rise to the risk of carbon leakage, due to which EU companies move their production abroad. To date, the EU has mitigated carbon leakage through free allocations to certain industries; however, along with the rising climate ambition and the higher carbon prices, the EU seeks to phase out free allocations. In parallel, a novel carbon border adjustment mechanism (CBAM) would be introduced, requiring the EU importers, as of 2026, to purchase certificates equivalent to the weekly EU carbon price.
The CBAM would initially apply to imports in five emissions-intensive sectors deemed at greater risk of carbon leakage: cement, iron and steel, aluminium, fertilizers, and electricity. The CBAM charge would cover the imports of these goods from all third countries. This paper explains the effects of the CBAM on North Macedonia, its companies and its export, including the recommendations.
Read the policy brief on the following link: