CBAM Regulation
The Carbon Border Adjustment Mechanism (CBAM) is a key part of the EU's Green Deal, aiming to reduce global carbon emissions. CBAM is designed to prevent carbon leakage, it ensures that climate efforts within the EU do not lead to the relocation of production.
This will require extensive collaboration with your Suppliers located outside of EU as significant amount of production information will be needed to comply with CBAM Legislation.
How will CBAM Work?
To comply with CBAM, companies need to follow these steps:
Identify Applicable Goods: Determine if your imported goods are among those covered by CBAM.
Report Emissions: Submit reports on the CO2 emissions of the imported goods to the relevant EU authorities.
Purchase and Submit CBAM Certificates: From 2026 onwards, Importers will purchase the required number of CBAM certificates. From 2027 onwards, Importers will have to submit back the CBAM certificates equivalent to the imported good’s production emissions.
Maintain Records: Keep detailed records of emissions data, CBAM certificates purchased and surrendered, and any other relevant documentation for verification and compliance checks.
What is CBAM transition period and its requirements?
This period serves as an adjustment and preparation phase for companies. Here’s what CBAM entails for importers:
Emissions Reporting: Importers are required to monitor and report the greenhouse gas and carbon emissions associated with their imported goods.
System Setup: Companies need to set up internal systems for collecting and reporting emissions data, ensuring that they can meet the CBAM reporting standards and deadlines.
Preparation for Compliance: Importers will have the time to familiarize themselves with CBAM and adjust their supply chains if necessary.
What are the main CBAM transition milestones?
Here are some of the key dates and milestones for the CBAM transition period:
Quarterly reporting: Importers must submit the CBAM reports quarterly. The deadlines for the submissions could be set at the end of the month following each quarter.
CBAM reports modifications: Importers can modify a submitted CBAM report until two months after the end of the relevant reporting quarter, and can modify the first two submitted reports until July 31st, 2024.
Default emission values: Until July 2024, importers may use CBAM default emissions values provided by the EU for ease of compliance in case your suppliers can’t provide required data.
Final submission deadline: The deadline for correcting any reports is set for February 28th, 2026. This deadline marks the last opportunity to adjust reporting data before the purchase of CBAM certificates begins.
What are CBAM non-compliance financial implications?
Transition Period (2023-2025): If importers fail to submit their CBAM reports or submit inaccurate data, they may face administrative fines that can go up to 50 Euros per ton of non-reported emissions.
Post-Transition Period (2026 onwards):
Failure to Purchase CBAM Certificates: Importers who do not purchase the required number of CBAM certificates will face fines likely to exceed the cost of compliance.
Misreporting Emissions: This can result in severe financial penalties, legal action, and potential exclusion from the EU market.
Operational Restrictions: Persistent non-compliance or severe violations may lead to importers being barred from importing covered goods into the EU.
What products are impacted by CBAM Reporting?
CBAM targets specific goods that are recognized for their high carbon footprint. The table on the left lists the general family of goods, its categories, and the first 4 digits of its CN codes.
The Combined Nomenclature (CN) codes are part of the EU's system for classifying goods for customs, taxation, and statistical purposes.
These codes are based on the Harmonized System (HS). Each CN code is unique, describes a specific product and is comprised of 8 digits. The original list of impacted codes and its CN codes comprises of more than 700 products.
