Guidance for importers on the Carbon Border Adjustment Mechanism (CBAM)

The European Union has introduced a new CO2 border adjustment scheme, known as the Carbon Border Adjustment Mechanism (CBAM), which aims to control emissions associated with the import of carbon-intensive products. Although it is due to come into force in January 2026, a transitional period will begin on 1 October, affecting products with the highest risk of carbon leakage. Below we break down the key aspects of this regulation and explain how it will affect importers of these goods in practice.

What is the purpose of the CBAM?

It is a tool to counteract carbon leakage, which occurs when companies with high greenhouse gas emissions move their production to areas outside the EU with less stringent climate regulations. By implementing it, the EU aims to reduce global emissions while ensuring a level playing field for companies, whether they produce inside or outside the continent.

How will it achieve this?

The CBAM will assess the emissions released in the production of goods and will equalise the carbon price between European products and imports for a range of products. This will ensure that EU climate targets are not circumvented by relocating production to countries with less ambitious policies, and that EU products are not replaced by more carbon-intensive imports.

Which products does it apply to?

The CBAM applies to carbon emissions from certain products imported into the EU where there is a high risk of carbon leakage. For the time being, these include cement, iron and steel, aluminium, fertilisers, hydrogen and electricity, as well as some precursors and co-products of these sectors. 

However, the EU has already opened the possibility of extending the scope of the Regulation to other products and companies in the future.

When will it take effect?

The timetable for the implementation of the carbon capture and storage mechanism is divided into two periods:

• Transition period (1 October 2023 - 31 December 2025): During this interim period, importers will be subject to new reporting requirements focused on the collection of essential data to refine the reporting methodology to be used in the final phase. In particular, importers will be required to submit a quarterly report containing data such as customs declaration number and customs procedure.
• Entry into force of the final system (from 1 January 2026): The main difference from the initial phase is that the purchase of CBAM certificates will be mandatory and only the reporting method based on the EU methodology will be accepted. Importers will be required to report annually the quantity of goods imported into the EU in the previous year and the amount of greenhouse gases (GHG) contained in those products. They will also be required to submit the corresponding number of CBAM certificates.

What should importers do during the transition to CBAM?

The Implementing Regulation, published on 17 August 2023, provides the basis for the transitional period during which importers will have to report at the end of each quarter the emissions incorporated in their goods subject to CBAM, but without paying any financial adjustment.

Steps to be taken by importers:

• Importers established in the EU must register as an authorised declarant in the Transitional CBAM Register (to be launched by 1 October 2023), before importing goods into the customs territory of the Union. 
• Customs authorities will inform customs declarants of their obligation to report information during the transitional period. The customs declarant will be the importer or the indirect customs representative depending on who lodges the customs declaration.
• Importers can choose different reporting models: the new EU method, equivalent national systems of third countries or reporting based on reference values. To facilitate the reporting process, the EU Commission is developing specialised IT tools, guidance, training materials and tutorials.
• The first report will be due by the end of January 2024 and will cover data for the fourth quarter from 1 October 2023. 
  Reports will be submitted quarterly and will include information on goods imported during that quarter of the year and will be submitted no later than one month after the end of that quarter. In particular, this document shall include the total quantity of each type of goods; the total actual embodied emissions; the total indirect emissions; the carbon price to be paid in a country of origin for the emissions embodied in the imported goods, taking into account any rebates or other forms of offsetting available.

What should importers do in the final phase of the CBAM?

From the entry into force of the final CBAM scheme in 2026, EU importers will purchase CBAM certificates corresponding to the carbon price that would have been paid if the goods had been produced under EU carbon pricing rules.  

The price of the certificates will be calculated on the basis of the average weekly auction price of the EU ETS, expressed in euros/tonne of CO2 emitted.

It should be noted that if a non-EU producer has already paid a carbon price in a third country for the emissions integrated for the production of the imported goods, the corresponding cost can be fully deducted from the CBAM obligation.

Steps to be taken by importers:

• Importers must apply for access to the CBAM register, which will provide them with a CBAM account number that will give them access to the CBAM register from where they can submit their declarations.
• Once the customs declaration has been lodged, the competent authority of the Member State will enter the person in the CBAM register and check the CBAM declaration for completeness of the information provided by the applicant.
• Importers have to report using the EU methodology only. They will be required to report annually by 31 May of each year the quantity of products imported into the EU during the previous year and the quantity of greenhouse gases (GHG) contained in those products. They must also submit the corresponding number of CBAM certificates.

Want more information? Access all the documentation produced by the European Commission on the implementation of the Carbon Credit Adjustment Mechanism (CBAM). 

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