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The EU Carbon Border Adjustment Mechanism Regulation and Implementing Rules Enter into Force

Client Updates

CBAM Key elements

Sectors Covered

Unlike the ETS, CBAM’s scope is more limited as it aims primarily to target energy-intensive companies exporting specific goods to the EU. Initially, the CBAM will apply only to the following selected sectors:

  • Cement
  • Fertilisers
  • Iron and steel
  • Hydrogen
  • Aluminium
  • Electricity

At the end of the transitional period, the coverage will be reviewed to assess the inclusion of additional goods already covered by the EU ETS and susceptible to carbon leakage. 

CBAM obligations – the transitional period (1 October 2023 – 31 December 2025)

During the transitional period, importers will not incur financial charges. However, they will be under the obligation to report on the emissions embedded in their goods subject to CBAM.

The information will have to submitted using the CBAM Transitional Registry which will be available as from 1 October 2023.

At high level, the report will have to include:

  • the total quantity of each type of goods;
  • the actual total embedded emission);
  • the total indirect emissions:
  • the actual total embedded emission 
  • the carbon price due in a country of origin for the embedded emissions in the imported goods, taking into account any rebate or other form of compensation available.

During the transitional period, importers will have to report both direct and indirect emissions for cement and fertilizer, while importers of iron and steel, aluminium and hydrogen will have to report only direct emissions.

Furthermore, it is important to note that no importation authorization is necessary during the initial implementation of the Regulation. 

We will now turn to the reporting obligations for the transitional period as set out in the Implementing Regulation.

The CBAM Implementing Regulation

Adopted on 17 August 2023, the Implementing Regulation sets out detailed rules concerning the reporting obligations that will govern the transitional period. The detailed rules for calculating embedded emissions of imported goods are based on the methodology applicable under the ETS for installations located in the EU As regards the production of hydrogen and its derivatives, reporting should take into account the Directive (EU) 2018/2001 – the so-called RES II Directive 2.

Reporting obligations

The Implementing Regulation identifies three categories of ‘reporting declarants’, i.e. parties obliged to notify:

  • The importer who lodges a customs declaration for the release of goods in its own name and on its own behalf.
  • The importer who declares the importation of goods defined as importers who hold an authorization to lodge a customs declaration, as referred to in Article 182(1) of Regulation No 952/2013 (the Union Customs Code) and declare the importation of goods.
  • The Indirect customs representative appointed under Article 18 of the Union Customs Code who lodges the customs declaration, in the case that the importer is established outside the EU, or the indirect customs representative has agreed to the reporting obligations under the CBAM.

CBAM reports content

The Implementing Regulation sets out the information that the CBAM reports must include by distinguishing between imported goods, embedded emissions and indirect emissions. The table below summarize the required information.



Imported goods

  • Quantity (in MW/h for electricity and in tonnes for other goods)
  • Type of imported goods identified by their CN code

Embedded emissions

  • Country of origin
  • Installation data, incl. (i) the applicable UN/LOCODE of the location, (ii) company name, address and English transcript of the installation and, (iii) geographical coordinates of the main emission source of the installation.
  • Production routes as specified in Annex II of the Implementing Regulation
  • Descriptive parameters affecting embedded emissions as specified by Annex III
  • Identification number of the mill (for steel goods)
  • The specific direct emissions of the goods

Indirect emissions

  • Electricity consumption (in MW/h)
  • Indication of whether the declarant reports actual emissions or default values
  • Corresponding emissions factor of the electricity consumed
  • Amount of specific indirect emissions;(see Annex III of the Implementing Regulation)

Gathering the above information might not be an easy task for the importer. The Implementing Regulation anticipates this and provides that the reporting declarant may request the producer of goods to use an electronic template provided by the Commission (see Annex IV to the Implementing Regulation).

Submission of CBAM reports and assessment of CBAM reports

CBAM reports have to be submitted within one month after the end of each quarter, being Q4 2023 the first quarter in which the new obligations apply.

Calculation of embedded emissions

The level of embedded emissions should be calculated on the basis of the two alternative methods below:

  • Calculation-based method: determining emissions from source streams based on activity data obtained through measurement systems and additional parameters from laboratory analyses or standard values.
  • Measurement-based method: determining emissions from emission sources through continuous measurement of the concentration of the relevant greenhouse gas in the flue gas.

Two derogations are provided:

  • Until 31 December 2024 (subject to results of similar coverage and accuracy compared to the methods discussed above):
  • methods used under monitoring, reporting and verification systems (MRV);
  • other methods, subject to the following applicable monitoring rules:
    • a carbon pricing mechanism where the installation is located;
    • an emission monitoring scheme at the installation which can include verification by an accredited verifier; or
    • compulsory emission monitoring schemes.
  • Until 31 July 2024, other methods may be used for determining the direct emissions of each import of goods if the reporting declarant lacks all the necessary information. In such a case, the CBAM report needs to indicate the methodology followed.

Importantly, the Implementation Regulation provides that up to 20% of the total embedded emissions of complex goods may be based on estimations made available by the operators of the installations.

Reporting on information regarding carbon price

CBAM does not apply to products imported from countries adopting a carbon pricing mechanism analogue to the EU ETS. In view of this, the Implementing Regulation specifies the information that a reporting declarant has to include in the CBAM report as regards the carbon price paid for the embedded emissions in the country of origin.

The full list of required information is provided by its Article 7 and includes in particular: (i) type of carbon price, (ii) country where a carbon price is due, (iii) quantity of embedded emissions covered by the carbon price, (iv) amount of the carbon price due, including a description of the carbon pricing instrument and possible compensation mechanisms, (v) quantity of embedded direct or indirect emissions covered by any rebate or other form of compensation, including free allocations, if applicable and (vi) the paid monetary amount.

The EC Guidelines and EC initiatives

On 17 August 2023, the EC also adopted the following two guidance documents:

The two documents provide a detailed explanation of CBAM functioning. Importantly, to assist the operators with its compliance, both documents also indicate sector specific explanations with reference to the relevant sections of CBAM (and its Annexes).

In order to simply the burden of gathering information from operators, the EC also released an optional template for the exchange of information between importers and operators of installations. The template is available here.

Finally, we note that between September – October 2023, the EC is organising a series of webinars, covering specifics of each covered sector (iron & steel, aluminium, cement, fertilisers, electricity and hydrogen) with the first webinar on the cement sector scheduled on 15 September 2023. Interested parties can register here.


Importers who do not comply with the CBAM obligations would be exposed to the risk of fine. Article 16 of the Draft Implementing Regulation provides for an ‘indicative’ fine between €10-50 per tonne of unreported embedded emissions in the case of failure to submit the CBAM declaration (or to correct a mistaken report) during the implementation period. For the failure to surrender CBAM certificates, the Regulation provides for a higher fine equal to €100 per non surrendered certificate.

CBAM obligations in the ‘fully operational’ period (as of January 2026)

As of 1 January 2026, the full set of CBAM obligations will apply. The key obligations for importers:

  • Authorization
    • importers will have to obtain the status of “CBAM declarant” issued by the Member States’ competent authority.
    • Without authorization, importers will not be able import CBAM goods into the EU.
    • An importer might appoint an indirect customs representative to act as an authorised CBAM declarant. When the importer is not established in the EU, the indirect customs representative shall apply for an authorization.
  • Calculation of CO2 embedded in imported CBAM goods
    • The calculation of CO2, necessary in view of the obligation to purchase CBAM certificates, has to be carried out following the CBAM methodology – as described above.
    • When the information for calculating the CO2 is not made available by the non-EU producer, the EU-registered importer will be able to use “default values” on CO2 emissions for each product to determine the number of certificates it needs to purchase.
    • To note that the calculation has to include not only direct but also indirect emissions.
  • Purchase of CBAM certificates
    • CBAM certificates will be made available by a common central platform.
  • CBAM certification surrender
    • By 31 May of each year, the authorised CBAM declarant shall surrender via the CBAM registry a number of CBAM certificates that corresponds to the embedded emissions declared in the annual CBAM declaration.
  • Annual CBAM declaration and verification process
    • By 31 May of each year, each authorised CBAM declarant shall use the CBAM registry to submit a CBAM declaration for the preceding calendar year.
    • The declaration should contain (i) the total quantity of each type of goods imported during the preceding calendar year, (ii) the total embedded emissions in the CBAM goods, (iii) the total number of CBAM certificates to be surrendered and, (iv) copies of the verification reports.
    • As regards the verification report, CBAM declarants will be also obliged to verify the embedded emissions according to the principles set out in the  CBAM Regulation.  

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