CBAM – Carbon Border Adjustment Mechanism
What is CBAM?
CBAM is the EU’s Carbon Border Adjustment Mechanism (CBAM) which is the EU’s tool 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.
The CBAM is designed to be compatible with WTO-rules
CBAM will apply in its definitive regime from 2026, while the current transitional phase lasts between 2023 and 2025.
The gradual phasing in 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.
CBAM will eventually capture more than 50% of the emissions in ETS covered sectors. The transitional period is to serve as a pilot and learning period for all stakeholders (importers, producers and authorities).
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 such as:
- CEMENT
- IRON & STEEL
- ALUMINIUM
- FERTILISERS
- ELECTRICITY
- HYDROGEN
This gradual introduction 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.
EU importers of goods covered by CBAM will register with national authorities where they can also buy CBAM certificates. The price of the certificates will be calculated depending on the weekly average auction price of EU ETS allowances expressed in €/tonne of CO2 emitted.
What is the CBAM definitive regime?
- EU importers of goods covered by CBAM will register with national authorities where they can also buy CBAM certificates. The price of the certificates will be calculated depending on the weekly average auction price of EU ETS allowances expressed in €/tonne of CO2 emitted.
- EU importers will declare the emissions embedded in their imports and surrender the corresponding number of certificates each year.
- If importers can prove that a carbon price has already been paid during the production of the imported goods, the corresponding amount can be deducted.
How can we support?
Our Carbon Catapult team support all of the requirements for CBAM reporting and we already work with the standards and their methodology that align with requirements such as ISO 14064-1, ISO 14068-1 & PAS 2060.
If you need CBAM support get in touch with our Carbon Catapult team today.
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