Prepare for the Carbon Border Adjustment Mechanism (CBAM) now
Earlier this year, the EU unveiled the Carbon Border Adjustment Mechanism as a mechanism for carbon neutral trade. With the CBAM starting in October, find out how you need to prepare in this article.
How does the CBAM promote carbon neutrality?
The Carbon Border Adjustment Mechanism (CBAM) requires you to pay a fee for the embedded carbon in your imports. This ensures that products entering the market are held to the same standard of carbon emissions as those that are manufactured domestically.
Otherwise, not only will environmental standards be circumnavigated, but sellers from outside of the EU may have an economic advantage as goods that are environmentally unfriendly are often cheaper to manufacture.
When importing a CBAM-related product, you will need to purchase credits that support a green initiative to offset the embedded carbon and bring your goods up to standard. The cost will be determined by the EU Emissions Trading System (ETS) allowances for that product.
When does this come into effect?
The CBAM will be introduced over two phases:
1. CBAM transition phase
The Carbon Border Adjustment Model transition phase will begin on the 1st October 2023 and end on 31st December 2025. This phase is for reporting only, and you are not required to buy CBAM certificates.
In your reports you must declare:
- Quantity of the product imported.
- Direct and embedded carbon emissions.
- Carbon costs in the country of origin.
Your first report is due by the 31st January 2024.
2. CBAM operational stage
The CBAM operational phase will begin from 1st January 2026, from which the full Carbon Border Adjustment Mechanism will be in effect. You must make an annual declaration to the commission, which can be done directly or through a CBAM-authorised declarant.
Your first annual declaration is required by 31st May 2027.
What you need to do now to prepare
With reporting starting in October, you don’t have must time to prepare. Obtaining information is never as quick as we think it will be, so it is best to start getting ready now.
Here are the five things you need to make sure of as soon as possible:
- Find out if any of your goods will be affected by CBAM.*
- Inform your suppliers of the change and requirements for reporting.
- Keep an eye out for any product-specific rules for calculating embedded carbon.*
- Check that your supplier information is in order before the CBAM transition phase begins in October so that you have complete data from the start.
- Make sure you have an EORI number.
*Note that all regulations relating to goods will be published against your commodity codes. Make sure your goods are classified correctly to avoid any problems.
Need help preparing for the Carbon Border Adjustment Mechanism (CBAM)?
Customs Support are here to help. Providing import clearance and customs consultation across the EU, our declarants are already working with businesses just like yours to prepare for the Carbon Border Adjustment Mechanism. Speak to one of our experts about getting ready for CBAM today.