CBAM: What companies should know now

The EU is one step closer to climate neutrality: in December 2022, a political agreement was reached on the carbon border adjustment mechanism as part of the European Green Deal. As a result, a reporting obligation for importers of certain energy-intensive goods came into force on 1 October 2023. We have summarised for you what you need to know about the border adjustment mechanism. For example, to whom the reporting obligation applies and how certificate trading works.

The Carbon Border Adjustment Mechanism (CBAM for short) is intended to counteract the risk of carbon leakage to countries with no or lower ambitions to combat CO2 emissions. The European Union recognises the risk of companies either importing goods from other EU countries with lower emission reduction requirements or relocating production to these countries. This could save costs that are inevitably incurred when switching to more environmentally friendly production.

This is why the EU Emissions Trading Scheme is being supplemented by the border adjustment mechanism and extended to imported goods. Companies will be obliged to purchase special certificates for every tonne of CO2 they import. The harmonised EU regulation on emissions trading is also intended to create incentives for non-EU countries to increase their climate ambitions.

The CBAM is part of the Fit for 55 package. It is one of the measures that the EU has launched as part of the European Green Deal to reduce greenhouse gas emissions by 55 per cent by 2030 compared to 1990 levels. By 2050, it wants to be the first confederation of states to achieve complete CO2 neutrality.

The new regulations will initially affect goods imported from non-EU countries that are particularly CO2-intensive, including cement, electricity, fertilisers, aluminium, iron, steel, hydrogen and some upstream and downstream products. By 2030, the scope of the CO2 border adjustment is to be extended to all industrial goods.

Non-EU countries that are integrated into emissions trading in the EU or whose EU emissions trading systems (ETS) are recognised as equivalent can be excluded from the scope of application.

Although certificate trading will not begin until later, the reporting obligation regulation that has been in force since October 2023 already poses challenges for many companies. They have to record the import of corresponding goods and determine the emissions along the supply chain. However, there is often a lack of appropriate technological solutions for this. In addition, according to legislation, imported CO2 emissions must always be calculated on the basis of actual values. Here, support from manufacturers in other EU countries is absolutely essential in order to obtain emissions data in a timely and legally compliant manner.

Currently, those subject to reporting obligations can supplement emissions information that is not provided by manufacturers using the default values provided by the EU Commission - however, this is only possible without restriction until 31 July 2024. From 1 August, the use of default values is only permitted if the proportion of emissions determined on the basis of the default values does not exceed 20% of the total emissions of a product.