CBAM – Carbon Border Adjustment Mechanism

by Maria Wośkowiak

26 September 2023

The transition period of application of the Regulation of the European Parliament and of the Council establishing a carbon border adjustment mechanism (CBAM) will start on 1 October 2023 and last until 31 December 2025.

CBAM is one of the pillars of the EU's "Fit for 55" package to combat carbon leakage.

Implementation of the new laws is divided into two phases:

transition period from 1 October 2023 to 31 December 2025 – importers will only have to file quarterly CBAM reports;
from 1 January 2026 – importers will have to buy and surrender certificates as a form of payment of carbon tax and will have to file annual reports on this.

In the transition period, importers or designated indirect customs representatives will have to fulfil reporting obligations by submitting quarterly reports to the European Commission on so-called embedded emissions involved in import of regulated goods.

The first report has to be filed by 31 January 2024 in respect of goods imported in the last quarter of 2023.

In its first life stage, CBAM will cover import of the following categories of goods:

cement, selected products from CN group 2523 (e.g. cement clinker, white Portland cement, whether or not artificially coloured, other hydraulic cements);
electrical energy (CN 2716 00 00);
fertilisers – e.g. nitric acid, urea, ammonia, anhydrous or in aqueous solution, nitrates of potassium;
metallurgical products – e.g. iron and steel, railway or tramway track construction material, screws, bolts, nuts, coach screws, screw hooks, rivets, cotters, cotter pins, washers of iron or steel, tanks, casks, drums, cans;
aluminium – e.g. sheets, aluminium foil, pipes, tubes, elbows, sleeves, wires, aluminium structures (e.g. bridges and bridge-sections, towers);
hydrogen.

Fines are envisaged for importers for failure to report or inaccurate and incomplete reporting.

The new regulations will significantly affect supply chains across the European Union. Importers should get ready for the changes by implementing internal procedures to fulfil the reporting obligations under the new regulation.

If you have questions about the new obligations, you are welcome contact our experts.