Detailed explanation
The CBAM is a key EU measure to combat global climate change. If stricter climate policies apply within the EU than in many non-EU countries, there is a risk of ‘carbon leakage’.
This means that companies from the EU relocate their carbon-intensive production to countries with less stringent environmental regulations. Or that EU products are replaced by more carbon-intensive imports. The CBAM aims to minimise these risks. It ensures that the carbon price of imports corresponds to the carbon price of domestic production.
Changes from 2026
The CBAM will apply in its final regime from 2026. The current transition phase will last from 2023 to 2025. This gradual introduction of the CBAM is aligned with the phasing out of the free allocation of emission allowances under the EU Emissions Trading System (ETS). This is intended to support the decarbonisation of EU industry.
During the final phase of the CBAM, EU importers of affected goods will have to register with national authorities and purchase CBAM allowances. The price of the allowances will be calculated based on the weekly result of the average auction of EU ETS allocations, expressed in €/tonne of CO2. Importers must declare the emissions embedded in their imports and surrender the corresponding allowances each year. If importers can prove that a carbon price has already been paid in the production of the imported goods, the corresponding amount can be deducted.
Transition phase since 1 October 2023
During the transition phase, importers of certain carbon-intensive goods only have to report the greenhouse gas (GHG) emissions of their imports. They do not yet have to purchase and surrender any certificates. This period serves as a test and learning phase for all parties involved. It will allow them to gather useful information on embedded emissions and refine the methodology for the final phase.
The CBAM will initially be applied to imports of certain goods and selected precursors. Their production is carbon intensive and has a high risk of carbon leakage. These include cement, iron and steel, aluminium, fertilisers, electricity and hydrogen. Once fully implemented, the CBAM will cover more than 50% of emissions in sectors covered by the ETS.
During the transition phase, companies will have a choice of reporting methods until the end of 2024. From 1 January 2025, however, only the EU method will be accepted. Estimates can only be used for complex goods if these estimates account for less than 20% of the total embedded emissions.
Assistance from the EU Commission
The European Commission has developed special IT tools. These are intended to help importers carry out and report these calculations. There are also comprehensive guidelines, training materials and tutorials to support companies during this transition phase.
