The Carbon Border Adjustment Mechanism (CBAM) is an instrument implemented
by the European Union to reduce greenhouse gas emissions and address carbon
leakage. It aims to ensure that imported goods are subject to a carbon price
equivalent to the carbon price of domestic production in the EU.
CBAM affects the electricity sector by putting a price on emissions associated with
electricity produced in countries outside the EU, with the goal of encouraging
sustainable practices and reducing carbon footprint.