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Carbon Border Adjustment Mechanism (CBAM)

Regulation (EU) 2023/956 of the European Parliament and of the Council of 10 May 2023 establishing a carbon border adjustment mechanism.

Link: Regulation (EU) 2023/956

CBAM

Content of this page:

Overview

The Carbon Border Adjustment Mechanism (CBAM) is an EU climate policy designed to prevent carbon leakage and create a level playing field for EU industries. CBAM ensures that imported goods are subject to a carbon price equivalent to that paid by EU producers under the EU Emissions Trading System (ETS). By aligning carbon costs for imports, CBAM incentivizes global industries to adopt lower-carbon technologies and promotes global climate action.

CBAM is a key element of the EU’s Fit for 55 package and contributes to achieving the EU’s climate neutrality goal by 2050.

Adoption of the regulation:May 2023
Application:Transitional Phase between 2023-2025, with full implementation starting from  2026.

Start and Purpose

  • The CBAM entered its transitional phase on 1 October 2023, with the first reporting period ending on 31 January 2024.

Scope

  • Applies to imports of carbon-intensive goods such as cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen.

  • Covers 50% of emissions in EU ETS-covered sectors, with plans to expand the scope by 2030.

Disclosure Requirements

  • Reporting Entities: Importers of goods covered under the CBAM regulation are required to report the greenhouse gas emissions embedded in their imports, including both direct and indirect emissions.

  • Reporting Frequency: During the transitional phase (October 2023 to December 2025), importers must submit quarterly CBAM reports to the relevant national authorities.

  • Reporting Format: Reports must be submitted separately as part of the CBAM-specific compliance process, not as part of standard financial or sustainability reporting. These reports are distinct and tailored to meet CBAM's specific data and emissions reporting requirements.

  • Reporting Methodology: Flexible reporting options are provided to facilitate compliance until the end of 2024:

    • (a) Full reporting based on the EU's approved methodology for calculating embedded emissions.

    • (b) Reporting using an equivalent method aligned with the importer’s country of origin, provided it meets EU standards.

    • (c) Reporting using default reference values established by the EU, which are available as a transitional option only until July 2024.

Further Aspects

Electricity generated in the exclusive economic zones of EU Member States is considered of EU origin and is exempt from CBAM reporting and adjustments.

Outlook

  • A review of the transitional phase will be completed before the definitive system starts in 2026.

  • Scope expansion to additional products and downstream sectors will be evaluated, with plans for inclusion by 2030.

  • Early 2025:

    • A CBAM Registry portal will enable non-EU operators to share installation and emissions data with importers directly.

    • Importers can apply for ‘authorised CBAM declarant’ status through their National Competent Authority.

  • From January 2025:

    • Authorised declarant status will be mandatory for imports from 1 January 2026.

Links and sources

EUR-Lex, carbon border adjustment mechanism (CBAM)

https://www.consilium.europa.eu/en/policies/fit-for-55/

https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en

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