The Carbon Border Adjustment Mechanism (CBAM) Regulation is designed to counter the risk of carbon leakage and operates by imposing a charge on the embedded carbon content of certain imports to the EU that is equal to the charge imposed on domestic goods under the EU ETS, with adjustments being made to this charge to take into account any mandatory carbon prices in the exporting country.
The new rules will initially affect goods imported from non-EU countries that are particularly carbon-intensive, namely specified goods within the cement, electricity, fertilizers, aluminum, iron, steel and hydrogen sectors, as well as some upstream and downstream products (mainly iron, steel and aluminum).
In the transitional phase of the implementation, from 1 October 2023 until 31 December 2025, affected companies are subject to a reporting obligation without financial obligations. During this period, importers must determine and document direct and indirect emissions that occur in the course of the production process of the imported goods.
With the start of definitive period and certificate trading from 1 January 2026, importers will be obliged to purchase sufficient emission allowances for imported embedded emissions during the year, thus putting obligation on non-EU producers to effectively communicate emissions embedded in their products.
