The Carbon Border Adjustment Mechanism (“CBAM”) applies to certain goods being imported into the EU. It is designed to apply the same carbon costs to those goods as would have been incurred had they been produced in the EU.

Transitional Phase of CBAM: New Requirements

To help prepare importers and their supply chains, transitional reporting obligations have applied since 1 October 2023, and will run until 31 December 2025.  Importers of in scope goods submit quarterly reports to the CBAM transitional registry. The reports detail quantities of imported goods, actual total embedded emissions, total indirect emissions, and carbon price in the country of origin.

Certain reporting requirements are changing as the transitional period progresses. Until the end of 2024, importers could choose from several monitoring and reporting methods to calculate embedded emissions. However, from 1 January 2025, only the calculation-based methodology or measurement-based methodology in the CBAM Implementing Regulation will be accepted.  Moreover, for the report due by 31 October 2024 (and subsequent reports), estimates (including the Commission’s default values) can only be used for complex goods, and only up to a limit of 20% of the total embedded emissions in those goods.

Full CBAM: Provisions that become applicable from 31 December 2024

The full CBAM regime will apply from the start of 2026. It will involve the importer buying CBAM certificates from the competent authority (in Ireland, the Environmental Protection Agency). By 31 May each year, the importer will declare the volumes of carbon embedded in the goods it imported in the previous year.  The importer will then surrender enough CBAM certificates to cover the volume of carbon it has declared in its report.

While the bulk of provisions implementing the full CBAM begin to apply from 1 January 2026, some apply from 31 December 2024.

Provisions applying from 31 December 2024 include a provision that requires importers (or their indirect customs representative) to apply for the status of authorised CBAM declarant prior to importing in scope goods into the EU. That status is needed from 1 January 2026 in order to import in scope goods.

Further provisions applying from 31 December 2024 require:

• the European Commission to establish a CBAM registry and make the information on it available to customs authorities and competent authorities,
• competent authorities to grant the status of authorised CBAM declarant to applicants, provided certain criteria are met, and
• the European Commission, on request by an operator of an installation in a country outside the EU, to register information on the operator and its installation in the CBAM registry.  This is a way supply chains can assist authorised CBAM declarants to comply with their obligations under the CBAM, and it means that supply chains can make their information available once, rather than to each importer separately.

Products within scope of the CBAM are listed in Annex I of the CBAM Regulation and fall into categories of cement, iron and steel, aluminium, fertiliser, and electricity and hydrogen. In the future, the EU may add further products to the CBAM.