EU Introduces Carbon Border Adjustment Mechanism (CBAM) for Imports

The European Union (EU) is taking steps to address the impact of carbon emissions from imports outside its jurisdiction. The European Commission has issued an announcement, seeking feedback from relevant stakeholders on the implementation of its Carbon Border Adjustment Mechanism (CBAM).

Scheduled to commence on October 1, the CBAM aims to monitor the carbon emissions associated with carbon-intensive goods exported into the EU. This marks a historic move as the Commission goes beyond assessing emissions at the national level and focuses on "energy-intensive companies" exporting goods to Europe.

During the initial phase starting October 1, companies will be required to submit emission values using specific EU, national-equivalent, and reference-value reporting methods. However, starting from January 1, 2025, only the EU reporting method will be accepted. It is important to note that companies submitting emission reports will not face financial consequences until the end of 2025.

Recognizing the need for a gradual approach, the EU executive plans to calibrate the CBAM until its full implementation by 2026. As part of this process, a digital reporting system is being developed to streamline the reporting process.

The method for calculating embedded emissions in goods is still being refined, and the Commission aims to finalize it by the end of the transitional period in 2025. Once fully operational, CBAM data will be used to impose a carbon tax on companies importing goods into the EU, matching the current levy applied to domestic production.

The carbon tax is determined in euros per metric tonne of emitted carbon dioxide, but the rates set by EU member states are not standardized. For example, in 2022, Sweden had the highest carbon tax rate at €111.7 ($121.5) per tonne, while Poland's rate was only €0.07 per tonne, as reported by the US-based think tank Tax Foundation.

Overall, the CBAM represents an effort to hold carbon-emitting producers accountable, ensure accurate emission reporting, and promote global decarbonization efforts beyond the EU. The EU aims to reduce greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels.

The public consultation period for CBAM reporting is open until July 11.

By fLEXI tEAM