Carbon Border Adjustment Mechanism (CBAM)
Explore the rationale behind its implementation, the products it encompasses and the intricacies of CBAM reporting.
What is CBAM and why is it implemented?
Which products are subject to CBAM?
Exemptions from CBAM
Who must submit a CBAM report?
How do I submit a CBAM report?
What happens if I don't comply with the rules?
What is CBAM and why is it implemented?
The European Union (EU) has implemented the Carbon Border Adjustment Mechanism (CBAM) to address the issue of carbon leakage. This mechanism aims to prevent the relocation of production activities from the EU to countries with less stringent carbon emissions regulations. The CBAM specifically targets six carbon-intensive product categories: iron and steel, cement, fertilizers, aluminum, electricity, and hydrogen. The rationale behind CBAM lies in the potential for carbon leakage, which occurs when companies shift their production to regions with lax environmental regulations to circumvent stricter domestic emission standards. This phenomenon can undermine the effectiveness of the EU's ambitious climate goals. Aligning Global Commitments: The Role of CBAM The EU, as a frontrunner in climate action, has implemented stringent emission reduction targets for its industries. These regulations, while necessary for environmental protection, can place European companies at a competitive disadvantage compared to their counterparts in countries with less stringent emission standards. CBAM serves as a tool to level the playing field, ensuring that imported goods contribute fairly to the EU's climate goals.
Carbon leakage poses a dual threat, jeopardizing both the European economy and global climate efforts. By shifting production to regions with less stringent environmental regulations, companies effectively export their carbon emissions, leading to an overall increase in global CO2 emissions. This phenomenon undermines the effectiveness of the EU's climate goals and exposes European businesses to an unfair competitive disadvantage.The Carbon Border Adjustment Mechanism (CBAM) is designed to address this challenge by creating a level playing field for companies operating both within and outside the EU. By imposing a carbon price on imported goods equivalent to the price paid by European producers, CBAM aims to discourage the relocation of production activities and incentivize the adoption of more sustainable practices across industries. In essence, CBAM serves as a crucial tool to safeguard the EU's environmental standards while ensuring that imported goods contribute fairly to the bloc's climate goals. By addressing carbon leakage, CBAM promotes a more sustainable and equitable approach to global trade, benefiting both the European economy and the environment as a whole.
Transitional period
The Carbon Border Adjustment Mechanism (CBAM) is undergoing a transitional phase from October 2023 to December 2025. During this period, importers are mandated to report the embedded carbon emissions associated with imported CBAM goods on a quarterly basis. However, no financial obligations are imposed at this stage. This transitional phase serves as a valuable learning and preparatory period for all stakeholders involved.
Effective from 2026, the Carbon Border Adjustment Mechanism (CBAM) will transition into its definitive regime, introducing mandatory permit requirements and a carbon pricing mechanism for importers of CBAM goods.
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Which products are subject to CBAM?
Product categories subject to carbon border adjustment:
- iron and steel
- cement
- fertilizers
- aluminium
- electricity
- hydorgen
The Carbon Border Adjustment Mechanism (CBAM) applies to goods imported into the customs territory of the European Union. Whether a product falls under CBAM depends on the Goods Nomenclature (GN) code, the country of non-preferential origin and the intrinsic value of the CBAM goods. The customs declaration and the corresponding customs legislation determine the GN code and the country of origin. For goods originating from countries outside the EU, CBAM typically applies to the products mentioned in the previous section. A comprehensive list of specific products and goods, including their corresponding GN codes, is available here.
The Carbon Border Adjustment Mechanism (CBAM) is exclusively applicable to goods bearing the designated GN codes. Products with GN codes not included on the official list are exempt from CBAM, even if they contain components like iron or steel. For further details regarding exemptions, please refer to the section titled "Which Goods Are Exempt from CBAM?"
As of October 2023, importers bringing 'CBAM goods' valued above €150 per shipment into the European Union are obligated to quarterly report the embedded carbon emissions associated with the production of those goods. This reporting requirement is fulfilled through the European Commission's digital CBAM registry.
Please be advised that a transitional period for the Carbon Border Adjustment Mechanism (CBAM) is in effect from October 2023 to December 2025. During this period, importers are required to quarterly report the embedded carbon emissions associated with imported CBAM goods. However, beyond this reporting obligation, no additional CBAM requirements apply. Importers who do not import any CBAM goods within a particular quarter are exempt from submitting a CBAM report for that quarter.
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Exemptions from CBAM
The Carbon Border Adjustment Mechanism (CBAM) is exclusively applicable to goods originating from non-EU countries and imported into the customs territory of the European Union. This implies that CBAM does not apply to goods entirely produced within the EU.
The Carbon Border Adjustment Mechanism (CBAM) exempts goods originating from certain countries and territories from its purview. These exceptions include: Iceland, Liechtenstein, Norway, and Switzerland are exempt from CBAM. These countries are part of the European Free Trade Association (EFTA) and have established close economic ties with the EU.
The Carbon Border Adjustment Mechanism (CBAM) exempts shipments with a total intrinsic value of CBAM goods of €150 or less. This exemption applies regardless of the presence of non-CBAM goods in the shipment. Key Points: Low-Value Shipment Exemption: Shipments with a total CBAM goods value of €150 or below are exempt from CBAM. Aggregate Value Calculation: The exemption considers the combined intrinsic value of all CBAM goods in the shipment. Non-CBAM Goods Irrelevance: The value of non-CBAM goods in the shipment does not affect the exemption's applicability. Rationale Behind the Exemption: The low-value shipment exemption aims to minimize the administrative burden for importers dealing with small-scale imports and to focus CBAM's application on shipments with a more significant carbon footprint.
The Carbon Border Adjustment Mechanism (CBAM) exemption based on the intrinsic value of CBAM goods per shipment is not influenced by the weight or volume of the imported goods.
The Carbon Border Adjustment Mechanism (CBAM) applies to goods that have undergone active processing and are subsequently released for free circulation within the European Union, either as the same goods or as processed products.
If your imported goods fall under the CBAM exemptions, you are not obligated to report on those goods. There is also no requirement to submit a "zero" report for exempted goods. However, if you import other goods that are not exempt, you are still required to file a CBAM report for those non-exempt goods.
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Who must submit a CBAM report?
Importers who handle their own customs declarations or utilize direct representation services are always considered the CBAM declarants. This responsibility remains regardless of whether the importer submits the CBAM declaration directly or through a representative.
Als je CBAM-goederen importeert én gebruik maakt van indirecte vertegenwoordiging voor jouw invoeraangifte, kan het zijn dat jouw indirect vertegenwoordiger ook optreedt als de CBAM-aangever.
This applies in the following cases:
- For importers established in the Netherlands who utilize TOP services for customs declarations, TOP can act as the CBAM declarant for the CBAM goods included in the corresponding customs declarations. This arrangement is contingent upon the agreement of the importer's indirect customs representative. If the indirect customs representative does not consent, the importer assumes the CBAM declarant responsibility.
- For importers established outside the European Union, their indirect customs representative is always the CBAM declarant. This means that the indirect customs representative is responsible for submitting CBAM declarations on behalf of the non-EU importer.
A CBAM declarant is required to submit a single CBAM report, even if they act as an indirect customs representative for some goods and as an importer for other goods within the same reporting period.
With this step-by-step plan, you can determine if you must submit a report.
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How do I submit a CBAM report?
CBAM reports must be submitted electronically through a digital register of the European CommitteeSubmitting a CBAM report necessitates a thorough understanding of the emissions data required for disclosure and the functionalities of the CBAM registry.
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What happens if I don't comply with the rules?
Als een CBAM-aangever geen CBAM-rapport heeft ingediend, dan kan de NEa een formeel verzoek doen om alsnog een rapport in te dienen. Als het CBAM-rapport niet volledig is of onjuistheden bevat, dan kan de NEa een formeel verzoek tot correctie doen. Een CBAM-aangever die een formeel verzoek van de NEa ontvangt moet alles doen wat redelijkerwijs mogelijk is om hieraan te voldoen. Doet de CBAM-aangever dit niet, dan kan de NEa een boete opleggen.
De NEa kan op deze manier handhaven, maar is daartoe niet verplicht. De overgangsperiode is bedoeld om te leren, ervaring op te doen met het systeem en gegevens te verzamelen voor de verdere ontwikkeling van CBAM. De NEa wil dat eventuele handhaving in redelijke verhouding staat tot deze doelen. Daarom zal de NEa eerder besluiten om een formeel verzoek te doen als het gaat om veel ingebedde emissies of als sprake is van herhaaldelijke overtreding van de regels. Bij een kleine hoeveelheid ingebedde emissies zal de NEa in beginsel niet handhavend optreden.
De NEa legt alleen een boete aan een CBAM-aangever op als deze onvoldoende heeft ondernomen om aan een formeel verzoek van de NEa te voldoen. Of hiervan sprake is, beoordeelt de NEa aan de hand van de omstandigheden van het geval. Het kan bijvoorbeeld zo zijn dat het een CBAM-aangever niet lukt om de werkelijke emissiegegevens van de producent te verkrijgen. Als deze CBAM-aangever kan aantonen dat hij alles heeft gedaan wat redelijkerwijs mogelijk is om de gegevens te verkrijgen en een CBAM-rapport met standaardwaarden heeft ingediend, bestaat in beginsel geen aanleiding om een boete op te leggen.
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