EU Carbon Border Adjustment Mechanism (CBAM) (2023)

Although there is only preliminary agreement on the ‘Regulation establishing a carbon border adjustment mechanism’, the Carbon Border Adjustment Mechanism (CBAM) will almost certainly come into force from October 2023. With this system, CO2 emissions must be paid for when goods are imported into the EU. This concerns emissions released during the production of goods produced outside the EU and imported to the EU. There will then be a kind of surcharge on import duties. On 1 October 2023, the transition phase will start (until 31 December 2025). During this transition phase, Customs will collect information from importers (through their declarants or otherwise). After the transition phase (2026), Customs will monitor that goods covered by the CBAM regulations can only be imported by authorised CBAM declarants. As a result, in addition to the reporting obligation, there will also be financial obligations, among other things, and importers will have to start purchasing CBAM certificates. This purchase obligation will be phased in parallel with the phasing out of free EU ETS allowances.

Importers of CBAM goods are required to report to the EU through customs during the transition phase. In doing so, they must report, among other things, the quantity of CBAM goods imported and the corresponding embedded emissions expressed in tonnes of CO2 emissions, and indicate whether a CO2 price already applies in the country of origin. Initially, CBAM will only apply to some specific products such as: iron and steel, cement, fertilisers, aluminium, electricity and hydrogen, as well as some precursors and a limited number of downstream products.

These are the following customs tariff chapters:

– Cement (chapter 25 of the Combined Nomenclature (CN))
– Steel and iron (chapters 72 and 73 of the CN)
– Aluminium (Chapter 76 of the CN)
– Electricity (Chapter 27 of the CN)
– Fertilisers (Chapters 28 and 31 of the CN)