Carbon Border Adjustment Mechanism, CBAM

What is CBAM and why?

In 2020, The European Green Deal was approved, which consists of policies set by the European Commission, aiming to make the European Union climate neutral by 2050.

And in July 2021, the Commission made its Fit for 55 policy proposals to turn this ambition into reality. A part of this is CBAM, where the EU wishes to put a fair price on the carbon emitted during the production of carbon intensive goods that are entering the EU, and to encourage cleaner industrial production in non-EU countries. CBAM will initially cover the Cement, Iron and Steel, Aluminium, Fertiliser, Electricity, and Hydrogen sector.

How does it work?

The CBAM regulation officially entered into force the day following its publication in the Official Journal of the EU in May 2023. The CBAM itself entered into application in its transitional phase on October 1, 2023.

During the transitional period starting on October 1, 2023 and finishing at the end of 2025, importers will have to report, at the end of each quarter, emissions embedded in their goods subject to CBAM without paying a financial adjustment, giving time for the final system to be put in place. Importers of CBAM goods will not need to be authorized during the transitional period in order to import these goods into the EU. Customs will inform importers of CBAM goods of their reporting obligations at the moment of import. Verification of the CBAM report, by an external independent body, will only be mandatory from 2026.
From January 1, 2026, the definitive period starts, and importers of CBAM goods into the EU will have to declare by 31 of May each year the quantity of goods and the embedded emissions in those goods imported into the EU in the preceding year. This indicates that the first report will have to be submitted by May 31, 2027.

During the definitive period, importers into the customs territory of the EU must pay for their GHG emissions through the CBAM certificate, which is priced based on the embedded emissions of their imported goods. Each CBAM certificate has a two-year duration, and its price is determined by the average weekly auction price of the EU ETS in the week before the good is imported, so that the price of that imported good is as close as possible to the carbon price of the same good manufactured within the EU.

Unlike the ETS, there will be no ‘cap and trade’ system under the CBAM.  By 2030, the CBAM aims to include all products covered by the EU ETS.

OUR SERVICES

GBP provides consultancy services on CBAM compliance, including calculating embedded emissions and preparing CBAM reports for products in 6 sectors covered by CBAM products exported to the EU. We offer a range of services to enhance our clients’ understanding of CBAM and its impact on their businesses. We also render business development tools for our clients to not only maintain their competitive edge in the global market but also to meet the company’s sustainability goals.

	Consulting Providing consultancy service on requirements regarding CBAM
	Training Training and workshop on how to conduct calculations and reports
	Reporting Conducting the calculation of embedded emissions for reporting

 

OUR PROJECT

GBP experts have prepared a report on embedded emissions in accordance with the EU methodology. We prepared and submitted reports to the EU importer on iron and steel products from our client located in Thailand.

CBAM: Assisting steel products manufacturer in compliance with new EU regulations

Please contact us here for consultations and assistance with CBAM compliance.