CBAM 2023 guide: Obligations, reporting and strategies

CBAM 2023 guide: Obligations, reporting and strategies

From October 1, 2023, the Carbon Border Adjustment Mechanism (CBAM) will bring new statutory reporting obligations for energy-intensive imported goods. This blog article sheds light on the background, affected companies and their obligations under this EU regulation.

Carbon border adjustment mechanism (CBAM) EU

Climate protection, and in particular limiting global warming, is one of the greatest challenges of our time. Europe wants to become the first climate-neutral continent (“Green Deal”) by 2050. Many European countries have strict climate regulations for energy-intensive industries in order to achieve their ambitious targets.

The European Union introduced the European Emissions Trading System (EU ETS) as a central climate protection instrument back in 2005. This instrument obliges the energy sector, energy-intensive industries, intra-European aviation and, from 2024, maritime transport to pay a price (emissions trading certificates) for the CO₂ emissions they emit.

Although the system should contribute to reducing greenhouse gas emissions, it initially increases production costs within the European Union. Companies could then relocate their production to countries outside the EU where there are no emissions costs. This so-called carbon leakage is now to be prevented by the new CBAM regulation.

Why was CBAM introduced?

The EU wants to become climate-neutral and is planning changes to EU legislation to achieve this. Fit for 55″ package. These regulations should enable the EU to reduce net greenhouse gas emissions by at least 55% by 2030.

On October 1, 2023, the European Commission introduced the Carbon Border Adjustment Mechanism (CBAM) as part of EU Regulation 2023/956. The CBAM aims to protect the climate and stop energy-intensive products from being moved to countries with lower emission costs.

High-emission goods imported into the Union will be charged the same CO₂ price. This price will be equivalent to what would be charged if the goods were produced within the European Emissions Trading System. This means that the EU adjusts the price level of goods imported from third countries.

Is my company also affected by the new legislation?

The new CBAM regulation obliges importers of certain emission-intensive products, such as

  • Iron and steel
  • Cement
  • Fertilizer
  • Electricity
  • Aluminum
  • Hydrogen

first report comprehensively on these imports. Other products (e.g. plastic) are to follow.

From January 2026, importers will only be able to import these goods if they purchase emissions certificates.

In addition to the products mentioned above, smaller imports of upstream and downstream products such as pipes, structural and construction parts made of iron and steel, aluminum foil, screws, steel nails, etc. may also be affected.

Goods under 150 euros and products from EU ETS countries are exempt from CBAM. This currently applies to Norway, Iceland, Liechtenstein and Switzerland.

Companies can check if their imported goods are affected. To do this, they must compare the CN code with the list in Annex I of the CBAM Regulation. The European Commission provides instructions on how plant operators outside the EU can identify goods that fall under CBAM.

What are the obligations for the companies concerned?

Every three months, importers must submit a CBAM report to the authority in charge

From October to December 2025, importers must send a CBAM report to the authority in charge every three months. The report contains information on the emissions of imported goods. In detail, the CBAM report must contain the following information:

  • the total quantity of each type of imported goods, broken down by the facilities in which the goods were produced in the country of origin
  • actual gray emissions of each type of goods
  • Indirect emissions for selected types of goods
  • CO₂ price paid in the country of origin.

The manufacturer’s data is required for the calculation of gray emissions. To this end, the companies concerned must intensify their data exchange with suppliers. The EU Commission has prepared guidelines for both importers and plant operators to facilitate the exchange of information.

Furthermore, a certain degree of flexibility in the calculation is possible within the transitional period under the CBAM Implementing Regulation. Different methods can be used for the calculation until December 31, 2024.

Default values can be used for the first three quarterly reports if the actual emissions data are missing. When calculating indirect emissions, default values can be used in some cases throughout the transition phase.

First-time reporting as of January 31, 2024

The first-time reporting is to take place on January 31, 2024 for the last quarter of 2023.

Importers can use CBAM transitional registers for this purpose. Access to the register must be requested from the national authority of the importer country. The authority in charge for Germany is the German Emissions Trading Authority (DEHSt) at the Federal Environment Agency.

The link to the CBAM transitional register can be found on the official website of the European Commission at Taxes and Customs. Here CBAM applicants will find a manual with explanations of the CBAM reporting structure and a sample file.

Changes to the CBAM report are possible up to two months after the end of the quarter. until one month after the submission deadline for the CBAM reports. Due to implementation problems with the new rules, longer correction periods were granted for the first two reporting periods up to the 31st.

Due to implementation problems with the new rules, longer correction periods were granted. These apply to the first two reporting periods and end on December 31. July 2024 has been granted.

The authorities may fine non-compliant companies up to 50 Ruros per tonne of unreported emissions as per legal requirements. This rule applies in two situations.

The first is when the parties who need to report don’t do it properly. The second is when their report is wrong or incomplete and they don’t fix it when asked by the authority. Further sanctions are possible in the event of serious violations.

The submission of CBAM certificates will be required from January 2026

From January 2026, importers will have to submit CBAM certificates for the emissions of imported goods. The price of a CBAM certificate is based on the average price of EU ETS certificates in the previous week. These prices are announced weekly.

Importing companies require an authorization as an approved CBAM declarant in order to import CBAM goods into the EU. Registration by December 2025 important, otherwise no import for non-registered importer.

Every authorized CBAM declarant will receive a CBAM account number, which they must include in the customs declaration.

The EU Commission is planning to create a coding system for documents. This coding must be stated in the customs declaration. It enables goods to be transferred duty-free.

What do I have to do to comply with the requirements?

First you need to check the products and suppliers. This allows you to determine whether they are classified as energy-intensive goods under CBAM. You can also find out which countries they come from.

The calculation of direct and indirect emissions is only possible using data from the direct manufacturer. This means that there must be a close exchange of information with the system operator/supplier. You must calculate the actual emissions of the goods mentioned. Furthermore, we must determine the CO₂ price already paid in the country of origin.

For large imports of affected goods, it is advisable to use standardized software to determine the emission values. They can then often prepare a finished CBAM report for uploading to the authorities.

Please contact us if you have any questions.

Source: Introduction of a carbon border adjustment mechanism (CBAM) in the EU from July 6, 2023; Federal Environment Agency; CBAM Regulation (EU); official website of the German Emissions Trading Authority (DEHSt)

Photo: Matthias Heyde (Unsplash)

Disclaimer: We assume no liability for the accuracy and completeness of the information. The information provided here does not constitute recommendations for action.

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