Carbon Border Adjustment Mechanism
CBAM – Carbon Border Adjustment Mechanism – is an instrument of EU climate policy whose aim is to prevent greenhouse gas emissions from being shifted from the European Union to other countries (“carbon leakage”) as part of the European Green Deal.
Carbon Border Adjustment Mechanism
CBAM – Carbon Border Adjustment Mechanism – is an instrument of EU climate policy whose aim is to prevent greenhouse gas emissions from being shifted from the European Union to other countries (“carbon leakage”) as part of the European Green Deal.
This means that CBAM is intended to protect European companies against competitors outside Europe, as most of them do not have any CO2 reduction obligations. CBAM thus helps to reduce the CO2 emissions of companies outside the EU. The Carbon Border Adjustment Mechanism is governed by Regulation EU 2023/956 on the establishment of a carbon border adjustment mechanism (“CBAM Regulation”). But when does CBAM apply and what are the obligations for companies?
CBAM starts in 2023 with a transition period without financial obligations
From 2026, importers will have to purchase CBAM certificates from a national authority that correspond to the total emissions contained in the imported goods. The CBAM price is based on the average EU auction prices of the previous week. From 2026, the free allocation is to decrease by 10 % each year and be completely replaced by 2035. During this transitional phase, the number of CBAM certificates to be surrendered will be reduced by the free allocation for these goods. Countries that participate in or are linked to the EU ETS are excluded.
During the planned transition phase, all companies within the EU will be required to prepare a report – the so-called CBAM report – on the emissions of the imported goods concerned from non-EU countries from October 2023. The first report is to be sent to the responsible authorities in January 2024 for Q4/2023. This information must be updated one month after the end of each quarter.
Mandatory information in the CBAM report
Declaration for the previous calendar year
In addition to this regular reporting, a declaration for the previous calendar year will also be required by May 31 from 2026. This includes:
Which product groups are affected by CBAM?
Before the end of the transitional period in 2026, the Commission will examine whether the scope should be extended to other goods, including organic chemicals and polymers. All goods covered by EU emissions trading are to be included by 2030. The Commission will also review the methodology for collecting indirect emissions and the possibility of including more downstream products.
Which companies are affected by CBAM?
All companies that import the above-mentioned product groups from outside the EU are affected. These can be trading companies or manufacturing and/or processing companies. Specifically, companies have a reporting obligation from January 2023 and an additional equalization obligation from 2026 – regardless of turnover and employee numbers.
Companies that do not process iron, steel or aluminum may also be affected if, for example, containers made of these materials that were previously imported from non-EU countries are used in production.
For importers of fertilizers, the most energy-intensive raw materials are affected; for importers of electricity, the focus is on a few companies that import energy from non-EU countries via pipelines or road and rail transport.
What measures do those affected need to take now?
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We support you in determining the requirements of the CBAM regulations and in preparing the CBAM reports and reporting obligations.
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