CBAM: What’s new?

| Insights

The Andersen European VAT & Customs Service Line recently published an in-depth study regarding the new Carbon Border Adjustment Mechanism (CBAM), the new regulation set to come into effect on a trial basis on October 1, 2023, and permanently from January 1, 2026. It aims to address carbon leakage by putting a price on carbon emissions from imported carbon-intensive goods in the European Union (EU). The CBAM will initially apply to goods such as cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen. During a transitional period, importers will report greenhouse gas emissions without making financial payments.

As previously stated, the definitive system will start on January 1, 2026, requiring importers to declare the number of goods imported and their embedded greenhouse gas emissions. They will then surrender the corresponding number of CBAM certificates. The price of these certificates will be calculated based on the average auction price of EU Emissions Trade System allowances. The CBAM will introduce new administrative burdens and costs for importers, particularly affecting goods coming from countries like Russia, Ukraine, Turkey, China, the United States, and the United Kingdom. Importers must prepare for reporting obligations and challenges related to calculating embedded emissions and gathering information about carbon prices paid in third countries. Non-compliance with reporting obligations may result in penalties, although the specific penalties have not been specified yet.