The Carbon Border Adjustment Mechanism (CBAM) is a transformative EU policy designed to curb global emissions by imposing carbon-related costs on high-emission imports, creating a level playing field between EU industries and global competitors while addressing the critical issue of carbon leakage and supporting a fairer, more sustainable trade.
The Carbon Border Adjustment Mechanism (CBAM) was introduced by the European Union (EU) Commission as part of the European Green Deal, a new policy initiative. This approach intends to limit the risk of carbon leakage while maintaining competitive pricing in the European market (European Commission, 2019). CBAM is one of several policy initiatives recommended to meet a newly defined emissions reduction target of 55% below 1990 levels by 2030, with the ultimate objective of becoming carbon neutral by 2050. To accomplish this ambitious climate objective, current emissions must be significantly and rapidly reduced, and CBAM is intended to help with the transition away from free allowances under the EU Emissions Trading System (EU-ETS).
The CBAM applies to specific goods imported into the European Union from outside its borders, as outlined in Regulation (EU) 2023/956 established on May 10, 2023, as part of the EU's Fit for 55 Package. The CBAM aims to align import prices with their carbon content and encourage foreign producers and EU importers to reduce emissions.
The CBAM will first apply to imports of specific goods and some precursors that produce a lot of carbon and are at risk of carbon leakage. These include cement, iron and steel, aluminium, fertilizers, electricity, and hydrogen.
The report to be submitted quarterly should contain the following mandatory requirements:
During the transitional period, the requirements for importing goods under the CBAM include:
Submit CBAM reports every quarter: Importers of goods, or their indirect customs representatives, are required to report the embedded greenhouse gas (GHG) emissions associated with their imports, including both direct and indirect emissions, on a quarterly basis. The submission of this report must occur no later than one month following the conclusion of each quarter.
Register in CBAM Transitional Registry: Created by the EU Commission to help traders prepare and submit the CBAM report, this registry also facilitates communication among the Commission, competent authorities, national customs authorities, and traders.
1. Assess Impact:
2. Collect Data:
3. Set Up Reporting:
4. Gather Import Data:
5. Prepare Report:
By the third quarter of 2024, industries exporting to the EU will no longer be able to rely on the EU’s default values for emissions. Instead, they must report the actual embedded emissions within their goods, aligning with EU standards to avoid penalties. This shift is expected to spur greater transparency and drive meaningful reductions in carbon footprints across global supply chains
The Carbon Border Adjustment Mechanism (CBAM) is here to regulate carbon emissions linked to imported goods into the EU. Starting in 2026, businesses will face carbon costs on high-emission products like steel, aluminium, cement, fertilizers, and electricity.
At iLenSys, we offer specific solutions to ensure you’re prepared:
With years of experience in Carbon Footprint Reduction, we make CBAM compliance straightforward and sustainable for your business.
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