As a front-runner in climate protection, the EU announced its aim to cut emissions by 55% by 2030 in comparison to 1990 levels.
Taking a step towards meeting these ambitious targets, the European Union introduced the Carbon Border Adjustment Mechanism (CBAM).
The CBAM will drive the world further ahead in the path of decarbonisation, with its impact being felt globally.
In an attempt to prevent "carbon leakage" from imports from non-EU countries, the CBAM aims to ensure that carbon emissions from production of certain goods are fairly priced.
Importers must pay a tariff on designated goods based on the EU Emissions Trading System (ETS) price, with a transition period starting in 2023 and full implementation by 2034.
Businesses must calculate embedded emissions and purchase CBAM certificates, with tariffs gradually introduced from 2026.
The CBAM is part of the European Green Deal and Fit for 55 package, promoting fair competition and environmental sustainability.
The CBAM would currently apply to the following goods when they are imported into the EU:
- Iron & steel
In addition, CBAM would apply to covered products imported from all countries outside the EU unless the country:
- Already participates in EU ETS (Iceland, Liechtenstein, and Norway)
- Fully links its own emission trading system to the EU ETS and adopts the same carbon price as paid under the EU ETS
As of October 2023, a three year transition period will begin, during which only reporting obligations will apply.
Over the course of these three years, importers must submit quarterly CBAM reports and assess their supply chain. They should also register with CBAM and track their emissions.
Starting in 2026, importers will gradually incur the costs of purchasing CBAM certificates, the cost of which will be determined by the EU ETS platform and weekly average auction prices.
Additionally, they can deduct the carbon price paid in the origin country from their compliance requirement.
Companies in certain industries with high carbon leakage risk will receive free allowances, potentially covering up to 100% of their needs, but as the Carbon Border Adjustment Mechanism (CBAM) takes effect, these free allowances will gradually phase out.
How ExpectAI can help:
At Expect, we are committed to assisting your organization in achieving its Carbon Border Adjustment Mechanism (CBAM) requirements with a focus on profitability. With an unwavering dedication to meeting the unique needs of our clients, we specialize in automating and streamlining the precise calculation and reporting of carbon emissions, thereby expediting and enhancing the journey toward achieving Net Zero emissions.
As an Expect customer navigating the CBAM transition, you will experience rapid and tangible benefits. We provide you with comprehensive insights into your organization's emissions on an enterprise-wide scale, meticulously prepared in a reporting-ready format. This empowers you with the critical tools needed for accurate carbon pricing and full compliance with regulatory standards.
Get in touch with us over at email@example.com to talk more about CBAM with our carbon experts, or if you would like to discuss your wider Net Zero goals and strategy.