On April 18th the European lawmakers backed the EU’s world-first plan to phase in a levy on imports of high-carbon goods from 2026.
- This levy - carbon border adjustment border mechanism (CBAM) - aims to prevent EU industries from being undercut by more-polluting foreign competitors, removing the temptation for EU firms to relocate to regions with less strict environmental regulations.
- CBAM will cover the sectors of metallurgy, oil refining, cement industry, production of aluminum, basic organic chemicals, hydrogen, fertilizers, and electricity. In the metallurgy, aluminum, and hydrogen sectors, only direct CO2 emissions (scope 1) will be considered, while in the rest, both direct and indirect emissions (scope 2) will be taken into account. By 2030, CBAM is expected to cover all sectors included in the EU Directive 2003/87/EC on the trading of greenhouse gas emission allowances.
In summary, the scheme will work as follows: a producer of goods subject to CBAM must pay for the CO2 emissions released during production when importing the goods into the EU by purchasing CBAM certificates at a market price determined by the EU Emissions Trading System (EU ETS). Non-compliance will result in fines and a ban on trading in the EU.
- From October 1st, 2023 to December 31st, 2025, a transitional period will be in place:
During the transitional period, importers will only report on their CO2 emissions and WILL NOT PAY for them.
- From January 1st, 2026, financial obligations will apply to importers:
Importers will only be able to import goods into the customs territory of the EU through an authorized CBAM declarant who is registered in the CBAM registry and authorized to do so.
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