One of the central pillars of the EU's Fit for 55 Agenda, CBAM is the EU's tool to fight carbon leakage, which happens when companies based in the EU move carbon-intensive production abroad to take advantage of lower standards, or when EU products are replaced by more carbon-intensive imports.
The CBAM transitional phase commences on 1 October 2023 and runs until the end of 2025. It will initially apply to imports of certain goods and selected precursors whose production is carbon intensive and at most significant risk of carbon leakage: cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen.
The Implementing Regulation details reporting obligations for EU importers of CBAM goods during the transitional phase, as well as the methodology for calculating embedded emissions released during the production process of CBAM goods.
During the transitional phase, traders will only have to report on the emissions embedded in their imports without having to pay any financial adjustment. This will allow businesses to prepare for and for the methodology to be fine-tuned by the end of the transitional phase in 2026.
Dedicated IT tools to help importers perform and report these calculations are currently being developed, as well as training materials, webinars, and tutorials to support businesses for the 1 October starting date of the transitional phase. While importers will be asked to collect fourth quarter data as of 1 October 2023, their first report will only have to be submitted by 31 January 2024.
To help both importers and third country producers, the Commission also published guidance for EU importers and non-EU stakeholders on the practical implementation of the new rules.
If you have any questions on CBAM or other carbon regulations impacting supply chain management, please contact our dedicated Sustainability team here.
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