As part of this effort, the European Commission proposed in 2021 a "Fit for 55" package of 12 related measures to ensure that various sectors such as energy, construction, transportation, and others align with the EU's carbon reduction goals.
The "Carbon Border Adjustment Mechanism" (CBAM) is a critical component of the Fit for 55 package. Its purpose is to prevent the "carbon leakage" (relocating industrial operations to countries with less stringent carbon regulations) and undermining carbon reduction efforts in the EU. CBAM aims to ensure equal treatment for domestic and imported goods while encouraging producers in non-EU countries to make their production processes more environmentally friendly, ultimately contributing to the global fight against climate change.
CBAM is designed to mirror the EU Emission Trading System (EU ETS). The design of CBAM is in full compliance with the rules of the World Trade Organization (WTO).
CBAM has been gradually implemented since October of this year, and during the transition period, which runs to the end of 2025, CBAM's regulations will apply only to six energy-intensive sectors industries: cement, steel, aluminium, fertilizers, hydrogen, and electricity. During this transition period, EU importers are required to submit relevant reports and are not obligated to pay any fees or purchase certificates. The information collected from importers during the transition period will not be used for enforcement; it will only serve as basis for analysis.
Starting from 1 January 2026, when CBAM enters definitive stage, EU importers will be required to purchase CBAM certificates, and the price of these certificates will be based on the average auction price of the EU ETS allowances. Non-EU manufacturers who have already paid a carbon price in their own country can deduct the corresponding costs from CBAM certificates.
To ensure the reliability of reported information, after 2026 verification of emission levels will be carried out by independent verification organizations accredited under EU regulations.
For more information and details about CBAM regulations and the reporting system, please visit the European Commission's Customs and Taxation website at https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en
For online learning courses related to CBAM, please visit the European Commission's Customs & Tax EU Learning Portal at https://customs-taxation.learning.europa.eu/.