CBAM

CBAM – EU’s Carbon Border Adjustment Mechanism

Rules regarding the import of steel, aluminum, and other products came into force on October 1, 2023. The European Union’s CBAM tool aims to encourage cleaner manufacturing in non-EU countries. What are importers’ obligations related to CBAM?

CBAM – what is it?

The CBAM, which stands for Carbon Border Adjustment Mechanism, is the European Union’s response to “carbon leakage.” “Carbon leakage” is the phenomenon of moving greenhouse gas-emitting sectors outside the EU to avoid stricter standards. The mechanism resulting from Regulation (EU) 2023/956 of the European Parliament and of the Council and Commission Implementing Regulation (EU) 2023/1773 impose a reporting obligation and a carbon fee on importing certain goods from outside the EU.

Full implementation of CBAM will continue until 2034. Importers will have to submit reports on the import of CBAM goods. From 2026, in addition to the obligation to submit declarations, there will be an obligation for authorized CBAM declarants to purchase CBAM certificates. This certificate will be in electronic format and correspond to one ton of carbon dioxide equivalent of embedded emissions associated with CBAM goods.

Does CBAM cover my goods?

Whether CBAM applies to you depends on what you import. CBAM includes several dozen items according to customs code.

Goods covered by CBAM

The CBAM mechanism covers goods imported into the EU (extended to include Switzerland, Liechtenstein, Norway, and Iceland) from energy-intensive industries: 

  • iron, steel, and steel products, such as steel pipes
  • artificial fertilizers and nitrogen products
  • aluminum
  • hydrogen
  • cement
  • electricity.

If you import the above products, use them as raw materials in inward processing, or place products containing such raw materials on the market, the CBAM mechanism applies to you.

The consequences of not reporting or submitting an incorrect CBAM report are financial penalties.

Exceptions to CBAM

Goods covered by some of the procedures (returned shipments, military use goods, and consignments with a value of less than EUR 150) are not covered by the CBAM mechanism and the reporting obligation.

EU carbon tax

Products from countries with more liberal carbon emission regulations are subject to a tax that increases their cost. Moreover, the introduction of CBAM is related to the withdrawal of the EU Emissions Trading System (ETS).

How will funds from the EU carbon fee be used?

Revenues from CBAM will be a new source of financing for the EU budget. The funds are intended to help least-developed countries decarbonize their manufacturing industries.

Who pays the EU carbon fee?

Importers submit reports on the carbon footprint of CBAM products. From 2026, they pay the EU carbon tax, meaning the difference between the fee for carbon dioxide emissions paid in the country of production and the price of carbon emission allowances under the EU emissions trading system.

To fulfill their obligations, entities must apply to become an authorized CBAM notifier and obtain a CBAM account number. An EU importer may acquire the status of an authorized CBAM declarant upon request or appoint an indirect customs representative. If the importer is of a non-EU status, this status should be obtained by their indirect customs representative.

CBAM register

The electronic CBAM register, launched on January 1, 2025, will contain data of authorized CBAM submitters and the CBAM certificates they hold. This information will be made available automatically to relevant customs and tax authorities.

The CBAM register will include information about each authorized applicant, including:

  • name and surname or name, address, and contact details of the authorized CBAM applicant
  • CBAM account number
  • the EORI number of the authorized CBAM applicant
  • identification number, sale price, sale date, date of redemption, repurchase, or cancellation of CBAM certificates for each authorized CBAM notifier.

When do you need to report your carbon footprint? Carbon footprint reporting obligation

During the transitional period (from October 1, 2023, to December 31, 2025), importers of products covered by CBAM must submit quarterly reports for the previous quarter. Direct and indirect emissions from imported goods are reported, as well as carbon prices paid abroad.

Only from 2026 will importers have to pay a carbon fee to the European Union.

How to submit a CBAM report?

The data to be provided in the CBAM report includes:

  • total quantity of each type of goods
  • actual total embedded emissions
  • total indirect emissions
  • the amount of the emission fee payable in the country of origin for emissions embedded in imported goods, taking into account all forms of compensation.

If you import certain products between October 1 and December 31, 2023, you must submit a report by the end of January 2024. Similarly, reports can be submitted for the past quarter by the end of the month following that quarter.

Annual CBAM declaration

Each authorized CBAM declarant will be required (for the first time in 2027 for 2026) to keep records and submit CBAM reports for the previous calendar year. Declarations for the previous year are submitted via the CBAM register by May 31 of the following year.

To submit the CBAM declaration, you must prepare the following information:

  • total embedded emissions associated with imported goods (expressed in tons of carbon dioxide equivalent emissions per MWh of electricity or tons of carbon dioxide equivalent emissions per ton of each type of goods in the case of other goods)
  • the total quantity of each type of goods imported in the previous calendar year (expressed in MWh for electricity and in tons for other goods) 
  • the total number of CBAM certificates to be surrendered – corresponding to the total embedded emissions – after reducing the home country emission fee and any adjustment necessary to reflect the extent to which EU ETS allowances are allocated free of charge 
  • and copies of verification reports issued by the accredited verifier.

It should be noted that the rules regarding the fulfillment of obligations related to CBAM may be clarified through implementing acts, so we encourage you to follow official channels. The following documents are useful for reporting CBAM products: