Carbon border adjustment mechanism

Lucie Šutovská
The European Union has introduced another important instrument to support the reduction of carbon emissions from the production of goods outside the EU in the form of a Carbon Border Adjustment Mechanism. However, this mechanism imposes broad obligations on importers of selected products when importing from third countries.

The Carbon Border Adjustment Mechanism (hereinafter "CBAM") was introduced by Regulation (EU) 2023/956 of the European Parliament and of the Council of 10 May 2023 (hereinafter "the Regulation"). To ensure the smooth implementation of the CBAM, the implementation of the Regulation was divided into two phases. The first phase is a transitional period effective from 1 October 2023 to 31 December 2025, when importers importing goods from third countries into the EU are obliged to report the emissions contained in their imports, both direct and indirect. The reporting period is a calendar quarter, and the report must be submitted by the end of the calendar month following the end of the quarter, with the first reports submitted by 31 January 2024. In the second phase of the CBAM, effective from 1 January 2026, the purchase of the corresponding amount of CBAM certificates, i.e. the obligation to pay the carbon duty on import, will also complement the reporting obligation.

The regulation applies to high emission products, the following goods are subject to CBAM:

  • cement,
  • electricity,
  • fertilisers,
  • iron and steel,
  • aluminium,
  • hydrogen,
  • products of the above goods.

According to Article 35 of the Regulation, the quarterly statement to be submitted during the transitional period must include information on the total quantity of each type of good, the total direct and indirect emissions contained and information on the carbon price payable in the country of origin for the emissions contained in the imported good, taking into account any discounts or other forms of compensation available.

Finally, we would like to point out that already in the transitional period, importers may be subject to penalties for non-compliance with the obligation to submit a CBAM statement.

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