If you import aluminium, steel, iron, fertilizers, electrical energy, hydrogen or cement into the EU and the goods are produced outside the EU, your imports are now subject to the new Carbon Border Adjustment Mechanism (CBAM), with fines being incurred for non-compliance.
What is the CBAM regulation?
The CBAM is a new carbon regulation to help the EU fight climate change.
While the existing EU Emissions Trading System (ETS) covers EU countries, the CBAM will apply to goods produced outside the EU, with the exception of Iceland, Norway, Liechtenstein and Switzerland.
This is to address the problem of ‘carbon leakage’. This is the term used to describe the situation where companies move the production of goods to countries with less rigorous emissions regulations in order to save on costs associated with carbon pricing.
The EU CBAM officially came into force in May 2023 with the transitional phase starting on 1 October 2023. During the transitional period, emissions reporting is required without 'financial adjustment' (payment) and the EU importer or indirect customs representative must submit a CBAM report on a quarterly basis. Submissions are due at the end of the month following each quarter and this started on 31 January 2024 for the first reporting period covering Q4 2023.
For reporting purposes, you will need to:
During the quarter -
• Note that your import is a CBAM-covered import
• Ask your suppliers, producers or installers for the emissions calculations data as per the CBAM procedure
• Suppliers have until the next reporting deadline to provide importers with this data
At the end of the quarter -
• Importers will need to submit a CBAM report to the European Commission, declaring the total greenhouse gas emissions for your shipments during this period.
• This includes direct emissions released in the manufacturing of the goods, certain upstream emissions and indirect emissions.
The permanent CBAM system will begin on 1 January 2026. When this commences, financial adjustment will be required via the purchase and surrender CBAM certificates at the same cost per tonne of carbon dioxide equivalent as the average EU ETS carbon price for that week.
View the gov.uk website for more information