The Carbon Border Adjustment Mechanism (CBAM) is a new EU instrument aimed at reducing carbon leakage and leveling the playing field related to carbon emissions in the production of relevant goods in the EU and third countries.
To whom do these requirements apply?
Individuals or legal entities that import the goods listed in the annex to the CBAM regulation. The product categories are:
- Electric power;
- Iron and steel;
- Chemicals (hydrogen and carbon dioxide).
In this case, import means:
- goods from a non-EU country to the EU and release for free circulation in the EU;
- temporary entry of goods from a non-EU country into the EU for processing, after which the processed goods are released into free circulation.
Obligations for importers from 2023 October 1 until 2025 December 31
Submit reports on the import of the listed goods to the EU. Reports must include:
- quantities of imported goods;
- direct and indirect greenhouse gas emissions related to the production of the relevant goods;
- pollution taxes paid, compensations and subsidies received in the country of origin of the goods.
During this period, the person must submit these reports at the end of each quarter, no later than within one month (the first reporting deadline is January 31, 2024);
Reports are submitted through a special CBAM portal.
Obligations for importers from 2026 January 1
- Requirement to become an authorized CBAM declarant
Only authorized CBAM declarants will be able to import the mentioned goods into the EU, and before importing these goods, the person must submit an application through the CBAM register, with which detailed information about the person making the request will have to be provided.
After submitting the application, the competent authority of the Member State where the applicant is established grants the status of authorized CBAM declarant, if the criteria are met.
- Requirement to purchase CBAM certificates
Importers will also have to purchase paid emission certificates (CBAM certificates). The number of CBAM certificates purchased must be equal to the number of greenhouse gas emissions – one certificate = one ton of emissions related to imported goods.
Member States will sell certificates through a central platform created by the European Commission. The price of CBAM certificates is calculated every week according to the average auction price of European emissions permits. In the spring of 2023, the price of one emission certificate was 85–90 euros.
Member States will be able to repurchase surplus certificates, but the number of certificates that can be repurchased cannot exceed one-third of the total number of CBAM certificates purchased by the authorized CBAM declarant during the previous calendar year.
More information can be found in the CBAM regulation.