As part of the “Fit for 55” package, the Carbon Border Adjustment Mechanism (CBAM) will be introduced under EU Regulation (EU) 2023/956 on 1st October 2023. The system is intended to prevent the outsourcing of CO2 emissions to non-EU countries, also known as carbon leakage, and to create incentives to introduce further CO2 pricing.
The EU Emissions Trading Scheme (EU ETS) has been a key instrument for achieving the European climate target of reducing net greenhouse gas emissions by at least 55% by 2050 (compared to 1990). The addition of the new Carbon Boundary Adjustment Mechanism (CBAM) is intended to prevent emission-intensive industries from relocating their production to countries outside the EU where lower climate standards apply – also known as carbon leakage.
In order to avoid unfair competitive advantages and to further support a worldwide reduction of emissions, the purchase of CBAM certificates will be obligatory for the import of emission-intensive goods into the EU. These should compensate for differences in carbon prices, so that European companies are not disadvantaged by higher climate protection costs.
What does CBAM mean for companies?
The introduction of the CBAM offset system will be gradual and will initially apply to emission-intensive sectors with a high risk of carbon leakage. These include the import of iron, steel, cement, aluminium, electricity, fertilisers and hydrogen (as well as certain upstream and downstream products in pure or processed form) (Annex I Regulation (EU) 2023/956). By 2030, all goods, that fall under the EU emissions trading will be subject to CBAM.
In the transitional phase from 1st October 2023 to 31st December 2025, all imports of the above-mentioned goods must initially be reported separately on a quarterly basis, with the first report due at the end of January 2024. Obligations for importing companies initially include:
- Calculation and documentation of direct and indirect emissions generated in the production process of the imported goods.
- Submission of a quarterly “CBAM report” with information on the import quantity of the goods and the direct and indirect CO2 emissions emitted in non-EU countries as well as the CO2 price to be paid in respective country of origin.
Pricing will not take place until 2026, when it will become mandatory to apply for a CBAM registration authorisation, purchase corresponding CBAM certificates and submit an annual CBAM declaration validated by an accredited inspection body.
Support from DFGE
With over two decades of experience in carbon accounting, DFGE can assist you in calculating and documenting your corporate or product carbon footprint. If you have any questions, please contact us via or by phone 08192-99733-20.
Sources:
https://www.consilium.europa.eu/de/infographics/fit-for-55-cbam-carbon-border-adjustment-mechanism/
https://www.umweltbundesamt.de/sites/default/files/medien/11850/publikationen/cbam_factsheet_0.pdf
https://eur-lex.europa.eu/legal-content/DE/TXT/PDF/?uri=CELEX:32023R0956&qid=1685018113346
https://www.ihk.de/stuttgart/fuer-unternehmen/international/import-export/import/cbam-5761850
