The Carbon Border Adjustment Mechanism

A new, green way of pricing carbon in imports to the EU

16 November 2023, Beijing

European Commission DG TAXUD

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The Carbon Border Adjustment Mechanism

❶ General presentation on CBAM

❷ The Transitional Period (2023-2025)

❸ The Definitive Period (from 2026)

#EUGreenDeal
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The Carbon Border Adjustment Mechanism

❶ General presentation on CBAM

#EUGreenDeal
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What is the context?

The European Green Deal

Union-wide climate-neutrality objective
2050
New 2030 target of at least 55% net
greenhouse gas emissions reduction

A socially fair transition

A competitive transition
A green transition

Legislative package
launched in July 2021 and
adopted by October 2023
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What is the aim?

Prevents carbon leakage

to ensure effectiveness of Complements and
EU climate policy reinforces the EU ETS

Contributes to decarbonisation
globally and to reaching EU
climate neutrality by 2050

#EUGreenDeal
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How do we do this?

Aligned with EU’s international

policies and legal commitments,
Mirror EU carbon pricing including WTO compatibility
through new mechanism
for imports into EU

Addressed to companies, not Focus on carbon-intensive

countries, based on actual carbon sectors
content of imported goods

Takes into account carbon price effectively

paid by third-country operator
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What are the sectors in scope?

CEMENT IRON & STEEL ALUMINIUM FERTILISER ELECTRICITY HYDROGEN

 Selected on the basis of 3 criteria:

 High risk of carbon leakage (high carbon emissions; high level of trade)
 Covering large share of greenhouse gas emissions of EU ETS sectors
 Practical feasibility

 Exclusions (under 150 € / countries linked with the EU ETS)

 In the future, scope may be extended to a limited list of ETS sectors at risk of carbon leakage (such as
refineries and chemicals), provided that such an extension is justified based on selected criteria
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CBAM methodology: from installation to goods

GHG emissions

• scope of the EU ETS is based on

ETS and CBAM installations
• scope of the CBAM is based on goods
Complex • CBAM methodology will translate
goods methods to determine emissions from
Production Simple installations’ to goods’ levels
energy intensive industries &
electricity generation &
goods
• means setting rules to narrow the
CBAM goods
commercial aviation system boundaries from production
CBAM sites down to the level of goods
ETS

Raw material Fuel

Natural
8 gas
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Gradual implementation of CBAM

Transitional period Post-transitional period

October 2023 - December 2025 January 2026 onwards

2023 2024 2025 2026

Monitoring and reporting Review 2025 Start of gradual phase-in of

(Implementing Regulation (EU) • Assessment feasibility / proportionality of scope CBAM/phase-out of free ETS
2023/1773) extension post 2026, including to allocation
• a limited set of EU ETS sectors at risk of
carbon leakage (e.g. refineries/ chemicals);
• a selected number of downstream products
which contain a high share of basic CBAM
goods;
• indirect emissions
• Impact on LDCs
• Progress in international climate discussions
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International cooperation framework

 CBAM can be complemented by bilateral, multilateral and international cooperation

with non-EU countries

 Establishment of a dialogue between countries with carbon pricing instruments

 Building on other international initiatives (e.g.OECD’s “Inclusive Forum for

Climate Mitigation Approaches”)

 Paving the way for ambitious climate policies and global carbon pricing

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CBAM is an internationally open mechanism

CBAM is open to decarbonisation efforts in third countries and favours

international coordination thanks to a four-tier system:

1. Actual emissions methodology – CBAM is based on embedded emissions of

the imported good
2. Deduction of the carbon price paid in third countries from the adjustment on
imported products
3. Countries applying EU ETS or linked to it will be excluded
4. Special rules on electricity for countries whose electricity market is “coupled” with
the Union internal market for electricity

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Guidance and support by the Commission

• E-learning (General and sector-specific)

Training
• Webinars (General and sector-specific)

Tailored guidance documents for:

Guidance • Producers in third countries
• Reporting declarants

Excel-based template to facilitate data collection

Templates
and information exchange

Dedicated information portal Launch of dedicated Commission website with

all information, Q&A and “how to find” guidance

IT reporting interface – • Dedicated IT interface for reporting of information

transitional registry • Detailed guidance for users
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Where to find further information on CBAM?

Visit the CBAM webpage regularly – our one-stop shop

https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en

 Link to the CBAM Transitional Registry

 2 guidance documents
 Communication template between importers and operators
 Registration to dedicated webinars
 Links to recordings of webinars through the Customs and Tax EU Learning portal
 Link to our E-learning materials through the Customs and Tax EU Learning portal
 Q&A and factsheet

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The Carbon Border Adjustment Mechanism

❷ The Transitional Period (2023-2025)

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Objectives of the transitional period

• The transitional period is a learning phase for all:

• Understanding respective roles and tasks
• Collection of information
• Facilitate smooth roll-out of the mechanism after the 2025

• The information collected will allow the European Commission to further specify and
finalise the methodology and find synergies with existing monitoring schemes

• The information collected will feed into the review of the mechanism by 2025 and
provide further clarity of the functioning

• Reporting flexibilities reflect the above and aim to introduce openness and balancing
a smooth introduction with information needs
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What are the reporting obligations in the transitional period?

October 2023 – December 2025

CBAM report containing the following:

No verification of emissions by
 Total quantity of goods imported during the EU-accredited verifier
preceding quarter
 Total embedded direct and indirect emissions
 The carbon price due in the country of origin
for the embedded emissions

Report to be submitted quarterly No CBAM certificates

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How to submit a report?

Who is responsible • The reporting declarant

• Same as the authorised CBAM declarant but not
for the reporting? authorisation needed yet

• Gain access to the CBAM transitional registry – request log-in

How to submit a via portal
• Fill out mandatory fields in the registry
report? • Indicate if reporting is by importer or on behalf of an importer
• Submit the report no later than 1 month after the quarter
• Yes – A report can be modified 2 months after the reported
quarter
Is there flexibility • For the first two CBAM reports (due Jan and April 2024)
modification is accepted until July 2024 (deadline of third report)
for the submission? • After the deadlines possibility to request reopening for correction
(IA-Article 9-3)
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What to submit?

Role of third- • Monitor and collect data on embedded emissions –Possibility to use
templates and guidance docs provided by the Commission
country • Communicate data to reporting declarants – Possibility to use templates
operators of provided by the Commission
• Is verification needed: Not yet!
installations

• Information on the goods: Quantity / Type identified by CN code (8-

What DIGIT) / Country of origin
information is • Info on the installation: Company name / Address / Location / Geo
coordinates
necessary to be • Info on the production: Routes / Parameters
communicated • Information the emissions: Specific direct and specific indirect
• Information on carbon price paid at production country (also for
for the reporting precursors)
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Flexibilities for the calculation of embedded emissions

• Until 31 July 2024, for each import of goods for which the reporting declarant does not
have all the information listed in Article 3(2), the reporting declarant may use other
referenced methods for determining the emissions, including default values

• Until 31 December 2024, other monitoring and reporting methods may be used, if
they lead to similar coverage and accuracy. They could be based on:

• a carbon pricing scheme where the installation is located, or

• a compulsory emission monitoring scheme where the installation is located, or

• an emission monitoring scheme at the installation which can include verification by an

accredited verifier

• Without time limit, use of estimations for up to 20% of the total embedded emissions
of complex goods
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What is the scope for emissions during the transitional period?

In CBAM scope
Not in CBAM scope SCOPE SCOPE
2 1
Indirect Direct

Emissions
generated from
Electricity consumed for the SCOPE the production SCOPE
production of CBAM goods 3 of CBAM goods 3
Indirect at installation Indirect
level (1)

Raw materials,
Input material under CBAM scope Consumption, transportation and
transportation and distribution,
(in the case of complex goods) distribution and end of life
previous waste, etc.

Upstream Company production Downstream

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(1) Direct emissions include emissions from the production of heating and cooling, even if that production takes place outside the installation.
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Who are the reporting declarants?

Rules for Customs Representatives

No representation by others - Scope 3

Own import
Importer is Indirect
the Subject to
reporting declarant
Direct customs representative
(Status: Customs Declarant)
reporting
Consumption, transportation
and distribution and end of life

Importer
Indirect customs representative or indirect customs obligations
(Status: Importer) representative may be
Importer the reporting declarant

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What are the steps to comply with the reporting obligations?

Step 1: Define the scope of goods concerned

Step 2: Determine the monitoring period to use

Step 3: Identify all the parameters you need to report

Step 4: Collect data on carbon price due in jurisdiction if any

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Who are the actors?

Customs
authorities

Information on CBAM obligations

Import data
Customs declarations

General analysis of
Operators of Emission Reporting CBAM European
information reported
data report Commission
installations declarants

Request for additional information or Conclusions

submission of report
Checks

National
Assessment of Indicative
competent
information assessment
authorities

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What is the CBAM Transitional Registry? (1/2)

Key highlights
Reporting Customs • Single platform to create
Declarants Authorities
synergies
• Tool to perform
CBAM-related tasks
CBAM European
Transitional Commission
• Secured platform to
Registry ensure confidentiality of
information​

Operators National
of Competent
installations Authorities OUTSIDE THE REGISTRY

VIA THE REGISTRY

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What is the CBAM Transitional Registry? (2/2)

https://cbam.ec.europa.eu/declarant
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What are the reporting deadlines?

MODIFICATION
REPORTING PERIOD SUBMISSION DUE BY
POSSIBLE UNTIL*
2023: October – December 2024: January 31 2024: July 31
2024: January – March 2024: April 30 2024: July 31
2024: April – June 2024: July 31 2024: August 30
2024: July – September 2024: October 31 2024: November 30
2024: October – December 2025: January 31 2025: February 28
2025: January – March 2025: April 30 2025: May 31
2025: April – June 2025: July 31 2025: August 31
2025: July – September 2025: October 31 2025: November 30
2025: October – December 2026: January 31 2026: February 28

*After the modification deadline, reporting declarants may request reopening of the file
before the national competent authority for eventual corrections.
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The Carbon Border Adjustment Mechanism

❸ The Definitive Period (from 2026)

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Basic overview of administration

Customs
Producer outside
EU • Checks authorisation of
EU Border
declarants
• Transmits information to
the Commission
Authorised CBAM
declarant Commission MS National
CBAM Authorities
Goods • Supervises both Customs and
• Is authorised by the
relevant Competent the national Authorities • Authorise CBAM
Authority of the • CBAM Registry declarants
Member State • Certificates price publication • Sell CBAM
• Declares yearly • Anti-circumvention practices certificates
verified emissions • Takes account of carbon price • Accredit verifiers
embedded in paid abroad • Apply Penalties +
imports and carbon • Controls CBAM declarations deal with Appeals
price paid abroad
• Surrenders CBAM
Emissions verified by
certificates
accredited verifiers
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Phasing-out of free allocation and phasing-in of CBAM

CBAM factor (i.e. percentage of benchmark level)

100%
2.5% 5.0%
10.0%
90%

80% 22.5%

70%
CBAM
60%
48.5%
50%

40%
Free ETS 61.0%

30% allowances 73.5%

20%
86.0%
10%
100.0%
0%
2026 2027 2028 2029 2030 2031 2032 2033 2034
Year
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Free Allocation CBAM

Transitional CBAM partially CBAM
CBAM phased in fully phased in

Third-country
emissions in
CBAM sectors

CBAM
Adjustment

CBAM Reduction of free CBAM

Information allocation due to “Fit-for- Adjustment
EU ETS
55”
emissions Emissions
in CBAM covered by free
sectors allocation

Emissions
covered by
free allocation

2023-2025 2026-2033 2034 onwards

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Calculation of the adjustment

Number of Price of Obligation and

certificates certificates adjustment

Actual Emissions CBAM

Amount EU ETS
embedded covered by free Obligation
of goods price
emissions allocation

Carbon price
effectively paid
abroad

Adjustment

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The Carbon Border Adjustment Mechanism

Thank you for your attention!

If you have any questions, please contact us:

[email protected]