The Carbon Border Adjustment Mechanism (“CBAM”): New climate/carbon tax on EU imports

The first CBAM reporting deadline will be implemented on January 31, 2024 even if the European Commission announced that, due to the technical problems affecting the relevant registry, an additional 30 days period will be granted. The CBAM mechanism is the new tool implemented by the European Union[1] that introduces a carbon tax companies will pay on the production of specific carbon-intensive goods entering the European Union. This new tax will not enter into force until 2026, but a transitional period will apply in the meantime. The CBAM will replace mechanisms established to prevent the risk of carbon leakage,[2] which occurs when European-based companies move carbon-intensive production to non-EU countries that have less stringent climate polices or lack them completely, or when products coming from the EU are replaced by more carbon-intensive imports. With the CBAM, the EU seeks equality between the carbon price of imports and the carbon price for domestic products with the ETS mechanism.[3]

The CBAM will apply to all companies importing from non-EU countries[4] specific types of carbon-intensive goods and selected precursors/downstream products with an intrinsic value not exceeding a specific threshold per shipment.[5] Under Regulation (EU) 2023/956 (the “Regulation”), the product categories currently subject to the CBAM are cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen, but the EU has already declared its intention to extend the scope of application of the CBAM to other product categories in the future.[6]

Under the CBAM, companies can import into the EU only if they are “authorized CBAM declarants.” More specifically, importers established in Member States can apply for CBAM declarant status through a CBAM registry (available from the appropriate national authority—in Italy this is the Italian Customs and Monopoly Agency) and can appoint indirect customs representatives who agree to act as authorized CBAM declarants by applying for authorization. For an importer that is not established in a Member State, the indirect customs representative must submit an application for authorization on behalf of the importing company.

Importers can buy CBAM certificates in the CBAM Registry. The certificate price is based on weekly ETS allowances, and likewise the number of allowances allocated for free is indicated by the ETS mechanism. Additionally, importers can deduct from the certificate cost the carbon price that they prove they have already paid during production of the goods in question.

On May 31 of each year, beginning in 2027 for year 2026, companies must declare the quantity of goods imported in the previous year with embedded emissions and turn in the corresponding number of CBAM certificates.[7] Once CBAM declarants return the CBAM certificates reported for the previous year, they can sell surplus CBAM certificates remaining in their accounts to Member States. On July 1 of each year, the European Commission will cancel CBAM certificates purchased during the year prior to the previous calendar year that remain in a CBAM registrant’s account, without offsetting. The Regulation provides sanctions for companies violating CBAM obligations.[8]

In order to implement CBAM obligations gradually, the European Union has implemented a transitional period that started on October 1, 2023, and will end on December 31, 2025. During this transitional period, importers must provide quarterly reporting on direct and indirect greenhouse gas emissions (GHS) embedded in their imports, drafted using one of the following methods:

  • following the indications in the Regulation (EU method);
  • using equivalent methods;
  • using default reference values (only until July 2024).

Beginning January 1, 2025, the only acceptable reporting method will be the EU method, and estimates may be used only for complex goods and for less than 20% of total emissions. To meet the reporting obligations, companies must use the CBAM transitional registry, which can be accessed from each national authority in a country where the importer is established  and can be accessed through this portal (link).[9]

[1] Regulation (EU) 2023/956 (“Regulation”) and Executive Regulation (EU) 2023/ 1773 (“Executive Regulation”).

[2] Directive 2003/87/EC.

[3] Directive 2003/87/EC.

[4] See Annex III no. 1 and article 2 Regulation (EU) 2023/956.

[5] Specified for goods of negligible value under Article 23 of Council Regulation (EC) No. 1186/2009.

[6] See Annex I of Regulation (EU) 2023/956.

[7] Calculated according to the contents of Article 7 of Regulation (EU) 2023/956.

[8] See Article 26 of Regulation (EU) 2023/956.

[9] Transitional CBAM Registry user manual for Declarants: CBAM-UMN-UI manual for Declarants (incl. Business Guide) – Release 1.2-v1.41.pdf (

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