The CBAM (Carbon Border Adjustment Mechanism) is a mechanism introduced by the European Union as part of its climate policy. It aims to achieve climate neutrality in Europe. CBAM imposes a levy on imported goods, the production of which involves high CO2 emissions, from countries with less strict regulations on greenhouse gas emissions. Since embedded emissions had to be reported, we already had 3 quarters for which a CBAM report had to be submitted. It was a big help to be able to use the European Commission’s default values for embedded emissions. From July 2024, it will be necessary to report according to actual values. We set out the details below.
Transition period
There is currently a transition period from 1 October 2023 to 31 December 2025. During this time, companies have the opportunity to lay out the CBAM process and prepare for the full range of obligations. Imports of products such as cement, iron and steel, aluminium, fertilisers, hydrogen and electricity are subject to quarterly reporting from 1 October 2023.
During the transition period, importers or indirect customs representatives are required to submit quarterly reports covering the goods imported during the quarter covered by CBAM. During the transitional period, importers shall not pay import duties on these goods.
31 July 2024 – important date at CBAM
31 July 2024 was the deadline:
- to submit the third quarterly CBAM report on CO2 emissions related to the production of goods,
- to modify the first and second CBAM reports
(according to the regulations, the notifier has the possibility to modify the report within two months after the end of the respective reporting quarter. For the first two periods, however, the deadline has been extended and the notifier can correct the reports for the first two reporting periods).
Reporting changes from 31 July 2024 and what next?
Until 31 July 2024, it was possible to report using the EC’s default values for embedded emissions. After this date, the use of default values will no longer be possible, so importers will have to collect actual data in order to correctly report embedded emissions.
European Commission announces changes to CBAM regulations. The European Commission’s webinar in June 2024 indicated that, among other things, there are plans to expand the catalogue of products subject to the CBAM obligation, changes to the CBAM methodology for calculating embedded emissions after the transition period. We therefore look forward to further information in this regard.
Summary
CBAM is an important step in the fight against global warming, but also a challenge for many companies. Reporting on the basis of actual data is bound to create numerous uncertainties and require more work. However, it should be borne in mind that failure to submit the required CBAM reports may result in high financial penalties. In addition, non-compliance can also affect the perception of the company by customers and business partners, leading to a loss of trust and reputation in the market. This is why it is so important for companies to take their CBAM obligations seriously and prepare for reporting well in advance.
If you are unsure whether you fall under the CBAM obligations, please do not hesitate to contact us.