What is CBAM?
CBAM is an environmental policy instrument being introduced by the EU. It is essentially a carbon tax on imports, and its aim is to help the EU decarbonise and reach its climate goals. EU producers in certain carbon-intensive industries will soon have to pay a carbon price under the Emissions Trading Scheme (ETS). CBAM will work in tandem with this to avoid “carbon leakage”- the relocation of production outside the EU to countries with less ambitions decarbonisation policies.
When fully up and running, importers of certain goods will have to buy certificates to cover the cost of their embedded carbon emissions.
Timelines and parties involved
To allow all parties to adjust to the new requirements, CBAM will be introduced on a phased basis. The Transitional Period, which kicked off on 1 October 2023, is largely about learning and data gathering. It runs until the end of 2025, and the primary obligation for importers of goods covered by the regulations is to file quarterly CBAM reports. The first CBAM report falls due on 31 January 2024.
The full Implementation Period is due to begin on 1 January 2026, and it is only at that point that importers will have to buy certificates to import their goods.
Sectors covered in the initial phase of CBAM
Cement
Iron & Steel
Aluminium
Fertilisers
Electricity
Hydrogen
Ultimately CBAM will cover embedded carbon emissions across a broad range of products. But the initial scope will focus on the above carbon intensive industries. Companies with goods within the scope of CBAM will be identified by the commodity codes of the goods in their import declarations.
CBAM is being rolled out by the European Commission (EC). The Environmental Protection Agency (EPA) is the competent body in Ireland. The Revenue Commissioners will provide the EC and EPA with customs data, so the regulators have a clear picture of what CBAM goods are being imported and by who.
Reporting
The main focus of the Transitional Period for importers is the quarterly reporting of embedded carbon emissions. Embedded emissions must be reported on at the factory level, which means there is a considerable amount of data that needs to be collected. The importer of the goods is responsible for the reporting, with reports to be submitted to the CBAM Transitional Registry by the end of the month following the quarter.
The Transitional Period began on 1 October last, so the data collection process should have already begun. Fines and penalties of up to €50 per ton may be levied by the regulators on importers for absent or incorrect returns. Importers will need to gather factory level emissions data for all CBAM covered goods brought into the EU. The importance of this new requirement should be communicated to trading partners, be they the producers themselves or intermediaries.
How SwiftFile can help
The introduction of new regulations invariably present challenges to those businesses affected by them. The CBAM reporting requirements are particularly detailed, and importers of steel, cement and fertilisers are at the sharp end. SwiftFile can help businesses get clarity on their new carbon reporting obligation. We can advise on the steps to take to ensure CBAM compliance.
Partnering with SwiftFile can also help streamline the data collection process. As customs specialists, we have a clear view of the data in the import declarations we file on behalf of our clients. We provide our partners with a monthly report of import activity for CBAM goods, which gives an instant picture of the CBAM import data they need to report on. We also advise on how import declarations can be used to help automate the data collection process.
If you would like to discuss how SwiftFile can assist with your Carbon Border Adjustment Mechanism (CBAM) challenges