Compliance with Carbon Border Adjustment Mechanism (CBAM)
What is the EU CBAM? How can your organization calculate and report carbon emissions to comply with regulation? Check out our Regulation Readiness program.
The Carbon Border Adjustment Mechanism (CBAM) is part of the European Union’s “Fit for 55” legislative package aimed at reaching carbon neutrality in Europe by 2050. This is the largest carbon pricing scheme in the world, which will tackle around 40% of the EU’s emissions and put some new reporting requirements on importers in the EU.
What is the Carbon Border Adjustment Mechanism (CBAM)?
The EU Carbon Border Adjustment Mechanism or CBAM, which entered into force in May 2023, is a mechanism that has been introduced to tackle carbon leakage. The CBAM will equalize the carbon price between domestically produced goods and imported goods with potentially higher embedded emissions. It will also encourage cleaner production for carbon-intensive goods outside of the EU. According to the Carbon Border Adjustment Mechanism rules, importers or indirect customs representatives that transfer goods into the EU are obliged to calculate and report the embedded emissions that occur during the production process of CBAM goods and their precursors.
Who will need to comply with the CBAM?
According to CBAM, the carbon-intense goods listed include six EU European Trading System (ETS) sectors accounting for roughly 50% of emissions: aluminum, cement, electricity, fertilizers, hydrogen, and iron & steel. For organic chemicals and polymers the implementation was postponed and further decisions will be taken during the transitional phase, by 2026.
To fulfill their CBAM obligations, importers or indirect customs representatives must register as authorized CBAM declarants prior to the import of CBAM goods into the EU and calculate the emissions following a certain methodology and reporting through the CBAM declaration each year. The information contained in the CBAM declarations must be validated by third party verifiers that are accredited under the EU ETS regulation. Importers must get access to the CBAM registry, the platform where data on embedded emissions is communicated to authorities and where CBAM certificates are bought, surrendered, and excess certificates are sold back to the authorities.
CBAM Timeline
The CBAM was agreed in December 2022 and entered in force in May 2023. This legislation is now in its transitional stage that started on 1 October 2023 and will run until the end of 2025. The legislation will be fully into force from 2026. Here is the complete timeline of the EU Carbon Border Adjustment Mechanism with a short explanation of each phase.
December
CBAM agreed
May 2023
CBAM entered into force
October 1, 2023 – December 31, 2025
Transitional phase of CBAM
Quarterly reporting of the greenhouse gas footprint of certain products imported to the EU (including direct and indirect emissions).
CBAM enters into full force
Requirement to purchase CBAM certificates to cover the GHG footprint, and the price of CBAM certificates would be linked to carbon prices at the EU ETS.
CBAM extension to wider list of products
The scope of CBAM is expected to extend to all product groups covered by EU ETS or to the list of products with a risk of carbon leakage (i.e. crude petroleum and petroleum products, inorganic basic chemicals, industrial gases, synthetic rubber, non-ferrous metals and others).
The transitional phase, that has started from October 2023, applies to EU imports of iron & steel, aluminium, electricity, certain fertilisers, cement and hydrogen, and precursors (i.e. cathode active materials) and a limited number of downstream products such as screws and bolts.
Not sure where to start?
Discover our regulation readiness program.
The regulation is very extensive and you may need support with it. Our program will help you to kickstart preparation for the upcoming regulation. The program includes:
Readiness Report showing how your business processes, ESG, and supplier processes line up with the requirements of the regulation.
A technical gap analysis showing any gaps that you need to rectify to be compliant with the CSRD.
A knowledge base; an increased understanding of the wider context requirements and the environment surrounding them through knowledge transfer documents, workshops, and discussions.
A scaling-up roadmap, that will guide you through the steps you need to take before the regulation comes into full force in 2025.
Demos, documentation, and a video to showcase the project internally.
Get in touch and learn more.
Digital Product Passport
The Minespider's blockchain-based Digital Product Passport is a digital ID of your materials or end product that contains all the key data along the supply chain.
Digital Product Passport can collect and communicate important product data, such as information on carbon emissions throughout a product’s entire lifecycle to comply with CBAM and ESG-focused regulations.
Find out more about how Digital Product Passports can help you comply with the CBAM.
