In a few days it will be the first quarter since the entry into force of the Carbon Border Adjustment Mechanism (CBAM), which underlines the European Union's ambition - ratified with the Green Pact - to achieve climate neutrality by 2050. To ensure compliance, companies need to be aware of their responsibilities under the new regulation.
In this way, EU legislators seek to promote cleaner industrial production, both within and beyond Europe's borders. In 2023 alone, CO2 emissions into the atmosphere will have exceeded 40.9 billion tonnesaccording to data from the annual report published by the Global Carbon Project, in the framework of COP28.
Climate change is a global problem for which real solutions are needed. Proof of this is the ambition and commitment that the European Union is demonstrating with its policies to combat it.
What is the purpose of the CBAM?
This regulatory measure aims to create a level playing field by applying the same price to products imported into the EU with a carbon footprint as to domestic products. This will control the risk of so-called "carbon leakage", which occurs when EU-based companies move their carbon-intensive production abroad. Usually to countries where climate policies are less stringent.
Although the definitive entry into force is set for 2026, a transitional phase has been in place since last October, which will affect the products with the highest risk of carbon leakage.
The CBAM will assess the emissions released in the production of goods and equalise the carbon price of European and imported products. This regulation applies to products with a high risk of carbon leakage, e.g. cement, iron, steel, aluminium, fertilisers, hydrogen and electricity.
The EU has already announced that coverage may be extended to other products after the end of the transition phase by 2030.
When does it come into force?
The timetable set by the European Union for the implementation of the Border Carbon Adjustment Mechanism distinguishes between two periods:
Transition phase
During this interim period, which runs from October 2023 to the end of 2025, importers will have to collect data on direct and indirect CO2 emissions for their products imported into the EU. Afterwards, they will submit a quarterly report with information on the customs regime.
From 1 January 2025, EU Member States will be able to grant "CBAM authorised declarant" status, which importers and indirect customs representatives must apply for in order to be able to submit the relevant reports.
After this transition period, the EU will carry out an assessment, which it plans to include all products subject to the Emissions Trading System (ETS).
Final entry into force
The regulatory measures will be effective from January 2026. From this point onwards, only reports based on the EU methodology will be accepted from those who hold the CBAM certificate. Thus, importers will have to declare annually the goods imported into the EU during the previous year, as well as the pollutant gases incorporated in them. To control these emissions, the industries concerned will be obliged to buy the carbon certificates at the price established by the Emissions Trading System, thus putting an end to the previous free allocation.
The gradual introduction of the CBAM will allow for a proportionate and careful transition for EU companies, external parties and public authorities. However, goods originating in the countries of Iceland, Liechtenstein, Norway and Switzerland, as well as Ceuta and Melilla, are excluded from the application of this mechanism.
The Covid-19 pandemic, Brexit, trade tensions between the United States and China, Russia's conflict with Ukraine and, most recently, the Israel-Gaza war have led to major changes in the way the EU operates. international trade. This has led to the need for new regulations to control goods entering the European Union.
The CBAM is a further step towards sustainability and climate neutrality, which is gradually being implemented in Europe.
