What does the CBAM mean? What is the purpose?

19 Apr 2023

CBAM update: transition period starts from Oct. 1, 2023

CBAM, a new European Union climate tax, is officially in the starting blocks. But what exactly does this CBAM mean? What is its purpose? And what changes does it all entail for you?

What does CBAM mean?

The EU decided to reduce its carbon emissions by 55% by 2030. The most important measure to achieve this goal? The CBAM (Carbon Border Adjustment Mechanism). Specifically, this means purchasing a carbon certificate when importing certain goods. This means that a carbon certificate must be purchased when importing certain goods. The reason for this is simple: it is an offset to the carbon price you pay if these goods are produced in the EU. Were you already paying a carbon price abroad? Then there is the possibility of a reduction in the price paid here.

What goods are covered by this mechanism?

The first phase of the CBAM includes the following items on which you must report:

  • Cement
  • Iron and steel
  • Aluminum
  • Fertilizer
  • Electricity
  • Hydrogen
  • Some precursors

The CBAM mechanism is not applicable for:

  • Steel shipments under 150 euros
  • Goods for military applications
  • Inward processing

Transition period and effective implementation

The first period of the CBAM is the transition period and starts on Oct. 1, 2023. As of this moment, there is a reporting requirement, although currently without consequences. During this transition period, an authorized declarant must report the following to the competent authority: embedded carbon emissions by relevant imports on a quarterly basis.

The effective implementation of the CBAM is scheduled for June 1, 2026. As of this writing, it is mandatory to purchase CBAM certificates on a central platform. Note that this platform has yet to be provided by the European Commission, which controls CBAM.