The Carbon Border Adjustment Mechanism (CBAM) is a key regulation introduced by the European Union to address the issue of "carbon leakage." It aims to align the carbon costs of imported products with those produced within the EU. By covering imports of specific high-emission products, CBAM ensures fair competition while promoting a global green transition.
The mechanism will be implemented in two phases:
• Transitional Period: October 31, 2023, to December 31, 2025.
• Formal Implementation: From January 1, 2026.
Industries and Products Covered by CBAM
Initially, CBAM applies to the following high-emission industries and products:
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Cement
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Iron and Steel
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Aluminum
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Fertilizers
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Electricity
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Hydrogen
Emission Types
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Direct Emissions:
Carbon emissions from the production process (e.g., carbon dioxide, nitrous oxide, and perfluorocarbons).
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Indirect Emissions:
Carbon emissions from the energy used during production (e.g., electricity), which will gradually be included in the mechanism's scope.
In the future, CBAM is expected to cover all industries included in the European Union Emissions Trading Scheme (EU ETS), with the goal of achieving full coverage by 2030.
How Does CBAM Work?
Authorization and Reporting Process
1. Importer Authorization
EU importers must apply to become authorized CBAM declarants or appoint indirect customs representatives to submit applications on their behalf. Once approved, declarants will receive a CBAM account number.
2. CBAM Registry and Central Platform
--CBAM Registry: Maintains records of all authorized declarants, as well as production facilities and operators in non-EU countries.
--Central Trading Platform: Used for the purchase and repurchase of CBAM certificates to verify the carbon costs of imported products.
3. Transitional Period Reporting Requirements
During the transitional period, importers must report the embedded carbon emissions of their imported goods quarterly, including direct and indirect emissions, and disclose any carbon price paid abroad. Submission of CBAM certificates is not required during this phase.
Transitional Period: Preparing for Full Implementation
From October 31, 2023, to December 31, 2025, CBAM enters its transitional period. This stage focuses on data collection, raising awareness of the definitive system, and helping businesses adapt to future compliance requirements.
Reporting Obligations
Importers are required to:
• Report the embedded emissions (direct and indirect) of imported goods quarterly.
• Provide proof of any carbon price paid in the country of production, if applicable.
Exemptions for Certain Countries and Regions
Some countries and regions with carbon pricing systems equivalent to the EU’s may qualify for exemptions:
• Exempted Regions:
--Members of the European Economic Area
--Switzerland
• Potentially Exempt Countries: Nations with cap-and-trade systems or carbon tax policies may also be exempted, provided their systems meet EU equivalency standards.
NBNQC: Your One-Stop CBAM Compliance Service Provider
We offer expert support to help you navigate the complexities of CBAM regulations:
• Carbon Footprint Accounting: Accurate calculation of both direct and indirect carbon emissions for your products.
• Streamlined Reporting Processes: Assistance in simplifying CBAM authorization and data submission procedures.
• Compliance Verification: Support in verifying and validating carbon emission data to meet EU standards.
Our team provides comprehensive training, technical support, and compliance solutions, ensuring you stay ahead at every step of CBAM implementation.
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