Carbon Border Adjustment Mechanism (CBAM) starts to apply in its transitional phase
As anticipated in our previous communications, the first transitional phase of the EU’s Carbon Boarder Adjustment Mechanism began on 1 October.
The EU’s Carbon Border Adjustment Mechanism (CBAM) is a new tool to avoid carbon leakage. It aims to put a fair price on the carbon emitted during the production of carbon-intensive goods entering the EU to encourage cleaner industrial production in non-EU countries.
The Carbon Border Adjustment Mechanism (“CBAM”) established under Regulation (EU) 2023/956 of the European Parliament and of the Council of 10 May 2023 will apply to imports of certain goods such as cement, electricity, fertilisers, iron and steel, aluminium, hydrogen and processed products from those goods into the customs territory of the European Union.
During the transitional period from 1 October 2023 to 31 December 2025, EU importers of those goods will have to report on the volume of their imports and the greenhouse gas (GHG) emissions embedded during their production, but without paying any financial adjustment at this stage. While importers are asked to collect data for the fourth quarter of 2023, their first report will only have to be submitted by 31 January 2024.
The transitional phase will serve as a learning period for all stakeholders (importers, producers and authorities). It will allow the European Commission to collect useful information on embedded emissions in order to refine the methodology for the definitive period, which starts in 2026.
As of that date, importers will need to buy and surrender the number of “CBAM certificates” corresponding to the GHGs embedded in imported CBAM goods.
To help EU importers and non-EU installations in the practical implementation of the new rules, a new CBAM transitional registry will become available on 1 October to help importers perform and report these calculations. The Commission is also gradually making available detailed written guidance, online training materials and webinars, sector-specific factsheets and a step-by-step checklist to support businesses as the transitional mechanism begins.
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