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Garden Furniture Spain GF European Exports Contribute to the CBAM Each Quarter
The Carbon Border Adjustment Mechanism (CBAM) is the EU's tool to put a fair price on carbon emitted during the production of carbon-intensive goods that are entering the EU, and to encourage cleaner industrial production in non-EU countries.
CBAM will apply in its definitive regime from 2026, with a transitional phase of 2023 to 2025. This gradual introduction is aligned with the phase-out of free allowances under the EU Emissions Trading System (ETS) to support the decarbonisation of EU industry.
Why CBAM?
Climate change is a global problem that needs global solutions. As the EU raises its own climate ambition, and as long as less stringent climate policies prevail in many non-EU countries, there is a risk of so-called ‘carbon leakage'.
Carbon leakage occurs when companies based in the EU move carbon-intensive production abroad to countries where less stringent climate policies are in place than in the EU, or when EU products get replaced by more carbon-intensive imports.
CBAM is a system to confirm that a price has been paid for the embedded carbon emissions generated in the production of certain goods imported into the EU. This ensures that:
the carbon price of imports is equivalent to the carbon price of domestic production;
the EU's climate objectives are not undermined.
CBAM is designed to be compatible with WTO rules.
EU importers of goods covered by CBAM will register with national authorities where they can also buy CBAM certificates. The price of the certificates will be calculated depending on the weekly average auction price of EU ETS allowances expressed in €/tonne of CO2 emitted.
If importers can prove that a carbon price has already been paid during the production of the imported goods, the corresponding amount can be deducted.
CBAM transitional phase (2023 – 2025)
On 1 October 2023, the CBAM entered into application in its transitional phase, with the first reporting period for importers ending 31 January 2024. The gradual phasing in of CBAM allows for a careful, predictable and proportionate transition for EU and non-EU businesses, as well as for public authorities.
CBAM will initially apply to imports of certain goods and selected precursors whose production is carbon-intensive and at most significant risk of carbon leakage: cement, iron and steel, aluminium, fertilisers, electricity and hydrogen.
With this enlarged scope, CBAM will eventually – when fully phased in – capture more than 50% of the emissions in ETS covered sectors. The objective of the transitional period is to serve as a pilot and learning period for all stakeholders (importers, producers and authorities) and to collect useful information on embedded emissions to refine the methodology for the definitive period.