On October 1, 2023, the EU's Carbon Border Adjustment Mechanism (CBAM) entered its transitional phase. CBAM aims to equalize carbon prices between domestic and imported products to protect the EU's climate policies from being undermined by production moving to countries with lower environmental standards or more carbon-intensive imports.
Initially, CBAM applies to imports of cement, iron, steel, aluminum, fertilizers, electricity, and hydrogen. EU importers must report import volumes and embedded greenhouse gas emissions but without immediate financial adjustments. Flexibilities, including default values and using the country of production's rules, are built into CBAM for its first year. This transitional phase allows stakeholders to learn, with the European Commission gathering information to refine the methodology for full implementation in 2026.
Importers will then need CBAM certificates to account for embedded greenhouse gases. A new CBAM transitional registry, guidance, training materials, webinars, factsheets, and a checklist support practical implementation. Reviews during the transitional phase will assess CBAM's performance and its potential expansion to other goods in ETS (Emissions Trading System) sectors.
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Link to CBAM Regulation
