How the EU’s new carbon scheme could sync with Middle East clean energy push
The EU’s new carbon pricing scheme could bolster the Middle East’s role as a viable energy trade partner, prompting increased investment in fuels such as green and blue hydrogen and the adaptation of existing regional carbon pricing mechanisms, experts say.
The first phase of the newly created Carbon Border Adjustment Mechanism (CBAM), designed to protect European companies that pay for their emissions under the EU’s trading system from unfair competition from imports from countries without carbon pricing, went into effect on October 1, 2023.
Starting from January 1, 2026, importers will need to purchase certificates to cover the embodied emissions in the goods they import. The price of the certificates will be determined based on the weekly average auction price of EU Emissions Trading System (ETS) allowances, which is measured in euros per tonne of carbon dioxide emitted.
The regulation currently focuses on carbon-intensive goods like cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen products.
Once CBAM is fully implemented in 2034, it is expected to increase the marginal cost of those commodities by an average of 10 per cent, according to consultancy Engie Impact.
