Carbon Border Adjustment Mechanism (CBAM)
The CBAM is a mechanism that sets a carbon price on certain imports to prevent carbon leakage and encourage cleaner industrial production. It aims to put a fair price on the carbon emitted during the production of carbon intensive goods that are entering the EU, and to encourage cleaner industrial production in non-EU countries.
By confirming that a price has been paid for the embedded carbon emissions generated in the production of certain goods imported into the EU, the CBAM will ensure the carbon price of imports is equivalent to the carbon price of domestic production, and that the EU's climate objectives are not undermined. CBAM will apply in its definitive regime from 2026, while the current transitional phase lasts between 2023 and 2025.
The gradual introduction of the CBAM is aligned with the phase-out of the allocation of free allowances under the EU Emissions Trading System (ETS) to support the decarbonisation of EU industry. The CBAM is designed to be compatible with WTO-rules.
On 1 October 2023, the CBAM entered into application in its transitional phase, with the first reporting period for importers ending 31 January 2024. The gradual phasing in of CBAM allows for a careful, predictable and proportionate transition for EU and non-EU businesses, as well as for public authorities.
The CBAM 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. With this enlarged scope, CBAM will eventually – when fully phased in – capture more than 50% of the emissions in ETS covered sectors. The objective of the transitional period is to serve as a pilot and learning period for all stakeholders (importers, producers and authorities) and to collect useful information on embedded emissions to refine the methodology for the definitive period.
During this period, importers of goods in the scope of the new rules will only have to report greenhouse gas emissions (GHG) embedded in their imports (direct and indirect emissions), without the need to buy and surrender certificates. Indirect emissions will be covered in the scope after the transitional period for some sectors (cement and fertilisers), on the basis of a defined methodology outlined in the Implementing Regulation published on 17 August 2023 and its accompanying guidance.
The Implementing Regulation on reporting requirements and methodology provides for some flexibility when it comes to the values used to calculate embedded emissions on imports during the transitional phase. Until the end of 2024, companies will have the choice of reporting in three ways: (a) full reporting according to the new methodology (EU method); (b) reporting based on an equivalent method (three options); and (c) reporting based on default reference values (only until July 2024).
As of 1 January 2025, several changes will be introduced:
With regards to the reporting, only the EU method will be accepted. For complex goods, estimates (including default values) can only be used if they account for less than 20% of the total embedded emissions. The Commission published default values on 22 December 2023. This report from the EU’s Joint Research Centre (JRC) fed into the preparation of those default values.
Furthermore, a new portal section of the CBAM Registry will allow installation operators outside the EU to upload and share their installations and emissions data with reporting declarants in a streamlined manner, instead of submitting it to each declarant separately. The portal will allow operators to ensure the confidential treatment of business-sensitive data. Reporting declarants will then be able to automatically populate their CBAM reports with this emissions data in order to comply with their reporting obligation. Registration for installation operators will open from 1 January 2025.
Finally, CBAM declarants will be able to apply for the ‘authorised CBAM declarant’ status via the CBAM Registry. Their application will be processed by the National Competent Authority of the EU Member State where they are established. This status will become mandatory as of 1 January 2026 for the import of CBAM goods in the EU customs territory.
A review of the CBAM's functioning during its transitional phase will be concluded before the entry into force of the definitive system. At the same time, the product scope will be reviewed to assess the feasibility of including other goods produced in sectors covered by the EU ETS in the scope of the CBAM mechanism, such as certain downstream products and those identified as suitable candidates during negotiations. The report will include a timetable setting out their inclusion by 2030.
The legislation is divided into two instruments, a Regulation establishing the CBAM and its operation and a second implementing it.
OFFICIAL INSTRUMENTS
The EU Regulation establishing the CBAM
Regulation (EU) 2023/956 of the European Parliament and of the Council of 10 May 2023 establishing a carbon border adjustment mechanism
Carbon Border Adjustment Mechanism Establishing Regulation - English - in force - 10 May 2024
Carbon Border Adjustment Mechanism Establishing Regulation - Francais - in force - 10 May 2024
Carbon Border Adjustment Mechanism Establishing Regulation - Deutsch - in force - 10 May 2024
The EU Regulation implementing the CBAM
Commission Implementing Regulation (EU) 2023/1773 of 17 August 2023 laying down the rules for the application of Regulation (EU) 2023/956 of the European Parliament and of the Council as regards reporting obligations for the purposes of the carbon border adjustment mechanism during the transitional period
Carbon Border Adjustment Mechanism Establishing Regulation - English - in force - 17 August 2024
Carbon Border Adjustment Mechanism Establishing Regulation - Francais - in force - 17 August 2024
Carbon Border Adjustment Mechanism Establishing Regulation - Deutsch - in force - 17 August 2024
Where to report
The Commission has developed the CBAM transitional registry to help importers perform and report as part of their CBAM obligations. Access to the registry should be requested through the National Competent Authority (NCA) of the Member State in which the importer is established.
CBAM Transitional Registry – Link for importers
The provided link is accessible solely to importers who have been duly registered by the relevant National Competent Authorities.
Users can contact the NCA of their respective Member State. Otherwise, unauthorised access to the registry is prohibited.
CBAM reporting declarants will find in the CBAM Transitional Registry User Manual an XSD file describing the full structure of the CBAM quarterly report, as well as a sample ZIP file, which may be uploaded in the Registry to fill in automatically the quarterly report’s data. For convenience, the XSD and the sample ZIP files can also be downloaded below.
In addition, the Commission has prepared a specific guidance document for declarants, which outline the functioning and step-by-step use of the “request delay” options in the CBAM Transitional Registry.
The CBAM Transitional Registry is continuously enriched with IT updates and fixes (see attachment below for the latest update).