The Carbon Border Adjustment Mechanism (CBAM) is a key measure of the European Union aimed at combating carbon leakage, which results from the ambitious climate policies implemented in the EU, such as the Emissions Trading System (ETS). Through this regulation and its implementing measures, some goods imported into the EU customs territory will be subject to CBAM certificates, in an amount determined based on their level of carbon emissions.

The main objective of CBAM is to ensure that imports into the EU are subject to rules equivalent to those applied to European producers. This helps preserve the competitiveness of European industries while preventing the relocation of production to countries where climate regulations are less stringent. Imports of certain carbon-intensive goods, such as cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen, will fall within the scope of CBAM.

The price of CBAM certificates will be aligned with that of emission allowances on the ETS market, under Article 21 of the regulation, thus ensuring fairness between EU producers and importers. To avoid double taxation, importers will be able to deduct from the required number of certificates any carbon price already paid in the country of origin of the goods.

Transitional Period and Reporting Obligations

A transitional period, extending from 2023 to 2025, has been established to allow for the gradual implementation of CBAM. During this period, importers will be required to report quarterly on the carbon emissions embedded in imported goods, without needing to purchase CBAM certificates. However, the reporting of emissions remains mandatory, under penalty of sanctions. The Commission Implementing Regulation (EU) 2023/1773 of August 17, 2023, outlines the reporting procedures during this transitional phase. Importers will also need to declare any carbon price paid in the country of origin, taking into account any rebates or other forms of compensation available.

This transitional period will allow the EU to collect essential data to refine the CBAM methodology and assess its effectiveness.

From 2026, CBAM will enter a definitive phase. Importers will be required not only to report the carbon emissions associated with imported goods following CBAM methodology, but also to purchase CBAM certificates to cover these emissions. Additionally, an authorized declarant status will be required to import the concerned goods, a status issued by the competent authorities of each Member State.

Role of Competent Authorities and Monitoring

The competent authorities of Member States, such as the Federal Public Service for Public Health, Food Chain Safety, and Environment in Belgium, will be responsible for overseeing and enforcing the CBAM regulation. The European Commission will also play a crucial role in monitoring compliance with reporting obligations and regulatory requirements by analyzing reports provided by importers.

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Thibaut de Buck van Overstraeten

Lawyer

thibaut.debuck@moov.law