EU ETS
Regulatory source: Regulation (EU) 2023/956, Article 3(5)
Definition
the system for greenhouse gas emissions allowance trading within the Union in respect of activities listed in Annex I to Directive 2003/87/EC other than aviation activities
More context
The EU ETS is the EU's domestic carbon market, and CBAM exists to apply an equivalent cost to imports — so it's the reference point the whole mechanism is built against. Where EU producers still receive free EU ETS allowances for a given good, the number of CBAM certificates an importer must surrender is reduced by the same amount, so importers and EU producers face a comparable carbon cost rather than a double charge.
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