The EU's Carbon Border Adjustment Mechanism (CBAM): Addressing Carbon-Intensive Goods Imported to the EU

JAS Sustainability Team

September 25, 2023

The EU's Carbon Border Adjustment Mechanism (CBAM) is a regulatory framework introduced to address carbon leakage by imposing reporting requirements on importers of carbon-intensive goods, promoting transparency, incentivizing lower-emission choices, and leveling the playing field between domestically produced and imported goods.

As the European Union (EU) heightens its climate ambitions, there are increasing regulations related to "carbon leakage." This phenomenon occurs when EU-based companies shift carbon-intensive production to countries with less strict climate policies, potentially increasing emissions. To address this, the EU has introduced the Carbon Border Adjustment Mechanism (CBAM), an environmental regulation designed to establish a fair price for carbon emissions associated with the production of carbon-intensive goods entering the EU. Its purpose extends to encouraging cleaner industrial practices in non-EU countries.

Goods Covered in the Initial Phase:

The CBAM's scope encompasses products like cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen in the transitional phase. Moreover, there are plans to evaluate the possibility of expanding the range of covered products by 2030, potentially including additional sectors.

Impacts:

Importers must carefully track and report emissions data for their imported goods. The European Commission is developing IT tools to help importers report and manage this data.
Non-compliance with reporting requirements may result in financial penalties.
The regulation introduces an additional layer of complexity in the import process.

Timeline:

As the CBAM unfolds between 2023 and 2035, it will have significant implications for industries, global competitiveness, and the fight against climate change. Here are some key dates to keep in mind:

October 1, 2023: The CBAM enters its transitional phase. Importers of carbon-intensive goods begin reporting embedded greenhouse gas (GHG) emissions.
January 31, 2024: The first reporting period for importers concludes. Flexibility in reporting methodologies is allowed.
January 1, 2025: Reporting using only the EU method becomes mandatory.

Benefits:

Importers disclosing emissions data enhances transparency about the carbon impact of goods.
The regulation incentivizes importers to choose lower-emission products, driving sustainable choices.
Imported goods are subject to emissions reporting similar to domestically produced goods, leveling the playing field.
The regulation raises awareness about carbon emissions associated with international trade.

How Can JAS Support You?

EU Import Customs Clearance: Our team of customs experts consult you and assist you in expediting the customs clearance process and the complexity of tariff codes, duties, taxes, and international trade regulations.*
EU Regulation Monitoring: We keep you informed about CBAM updates and evolving regulations, ensuring you remain compliant and adaptable to changes.

*The importer is at all times responsible for providing all documentation related to customs clearance, including correct shipment/tariff and emission-related data.

Learn More on the European Commission Website JAS Reference Sheet: The EU's Carbon Border Adjustment Mechanism (CBAM)

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