Is your company ready for CBAM?

Carbon Border Adjustment Mechanism (CBAM) is a key tool in EU's fight against climate change and in the goal of achieving net zero emissions. CBAM is intended to ensure that companies outside the EU are subject to the same requirements as European companies. This means that importers of certain goods into the EU must purchase CBAM certificates to ensure that the imported goods meet the same strict environmental standards as goods produced within the EU. If the goods have higher CO2 emissions, the importers must pay the difference.

Ambitious goal and implementation

The CBAM, which came into force on October 1, 2023, is designed to ensure that companies inside and outside the EU compete with equal terms. This is achieved by imposing a price on imports as off 2026 – after the phase-in period – of goods produced outside the EU with high CO2 emissions. During the phase-in period, the regulation requires companies importing goods within the industries: iron, steel, aluminium, cement, fertiliser, electricity and hydrogen to report the embodied CO2 emissions when the value of the goods exceeds EUR 150 per consignment. These industries account for a large share of global CO2 emissions, and CBAM is expected to cover more than 50% of the emissions in the industries covered by EU’s Emissions Trading System (EU ETS). [i]

The reporting takes place through customs codes and must be made quarterly to a CBAM register, which in Denmark is operated by the Danish Energy Agency and is linked to a pan-European register. 

[i] https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en

Phase 1: Reporting information

Until the end of 2024, companies have three options for reporting their emissions:

• (a) full reporting according to the new EU methodology
• (b) reporting based on an equivalent methodology, or 
• (c) reporting based on standard reference values (until July 2024 only)

As off January 1, 2025, only the EU methodology is legal, and estimates can only be used for complex goods if they account for less than 20% of emissions. During 2024 importers are expected to provide accurate data in cooperation with their subcontractors.

Phase 2: CBAM certifiCATEs

As off January 1, 2026, importers must annually declare the quantity of imported goods as well as their embodied CO2 emissions from the previous year. These emissions must be matched with CBAM certificates priced at the level of EU's CO2 quotas. Sanctions for missing or erroneous reporting are expected to be €10-50 per tonne CO2.

Phase 3: Phasing new sectors IN

The final phase marks the transition from free quotas under the EU ETS to the full implementation of CBAM, including the phase-in of new sectors. The aim is that all sectors covered by the EU ETS are gradually included in the CBAM regulation. This will ensure that European and foreign producers contribute equally to global climate efforts and promote fair competition on the European market.

The role of the importer in cbam

"Importers have the primary responsibility for enforcing CBAM," explains Mark Fraser, Sustainability Business Development Manager at Bureau Veritas. "They play a key role in reporting, data collection, verification, and compliance." Importers must submit detailed information, including the declarant's identity, address, role, and information about importers and representatives. CBAM also requires documentation of all imported commodities – including customs tariff numbers, country of origin, and emissions (direct and indirect). The report must include data on production methods and emission parameters to ensure full transparency of the environmental impact. This type of reporting is similar to reporting required under the EU ETS (EU CO2 Emissions Trading System) – a system that Bureau Veritas is approved to verify and has gained much experience with, since the start of the scheme in 2005.

prepare the company for cbam: necessary steps

The transition period until December 31, 2025 serves as an introduction period during which importers, manufacturers and authorities can adapt, before the regulation enters into force. It is expected that the EU will start cautiously with CBAM, but gradually tighten the requirements, which is why it is wise to be proactive and start preparing now so that you are ready when the regulation is fully implemented.

Companies can already identify affected goods, calculate reductions and work to reduce their carbon footprint. CBAM provides new insights and opportunities to reduce scope 3 emissions, and companies should take advantage of these opportunities.

Key milestones and schedule