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Last May, the European Union implemented a new regulation aimed at supervising CO2 emissions related to the import of products with a high carbon footprint, known as the 'Carbon Border Adjustment Mechanism' (CBAM).

The implementation of this measure is scheduled for January 2026, although a transition phase has already been approved that will begin on 1 October 2023, focused on products with a high potential for carbon leakage, affecting all importers of such products.

What does this regulation consist of?

The CBAM is a tool designed to try to counteract carbon leakage in those companies with high emissions that move production to regions with more lax climate regulations outside the EU. In this way, the EU aims to reduce global emissions and promote equality for all companies, regardless of their production location.

The CBAM will be responsible for assessing production emissions and equalising the carbon price between European and imported products, preventing the circumvention of EU climate targets and avoiding the substitution of EU products by imports with a higher carbon footprint.

The CBAM applies to the carbon emissions of certain products imported into the EU that present a high risk of carbon leakage. These include cement, iron and steel, aluminium, fertilisers, hydrogen and electricity, as well as some products related to these sectors. In the future, the EU also envisages expanding the regulation to other products and sectors.

When will it be implemented?

The implementation of the Carbon Market Adjustment Mechanism will take place in two phases:

• Transition Phase (1 October 2023 - 31 December 2025):
  During this period, importers will be required to comply with new reporting obligations aimed at collecting essential data to refine the reporting methodology to be used in the final phase. This includes submitting a quarterly report containing information such as customs declaration number and customs procedure.
• Definitive System (from 1 January 2026):
  In this phase, importers will be required to obtain CBAM certificates and exclusively use the EU methodology for reporting. They will have to declare annually the quantity of goods imported into the EU during the previous year and the quantity of greenhouse gases incorporated in those products. They will also have to submit the corresponding number of CBAM certificates.

What do importers have to do in each phase?

In the CBAM transition phase, importers must report the emissions of their goods subject to CBAM on a quarterly basis without making payments. To do so, they must follow these steps:

• 1. Register as an authorised declarant in the CBAM Transitional Registry by 1 October 2023 if they are established in the EU.
• 2. Comply with the reporting obligations to be established by the customs authorities during the transitional period.
• 3. Choose between different reporting models, such as the EU method, equivalent national systems of third countries or reporting based on reference values.
• 4. Submit the first report by the end of January 2024, covering data for the fourth quarter as of 1 October 2023.
• 5. Reporting is on a quarterly basis and should include information on goods imported during that period, such as the total quantity of each type of goods, actual embodied emissions, indirect emissions and the carbon price due in the country of origin for emissions embodied in imported goods.

In the final phase of CBAM from 2026, EU importers will have to purchase CBAM certificates corresponding to the carbon price that would have been paid if the goods had been produced according to EU regulations. The steps for importers in this phase include:

• 1. Applying for access to the CBAM Registry and obtaining a CBAM account number.
• 2. Submit the customs declaration and be entered in the CBAM register by the competent authority of the Member State.
• 3. Submit annual reports by 31 May each year, detailing the quantity of products imported into the EU during the previous year and the quantity of greenhouse gases incorporated in those products. The submission of corresponding CBAM certificates will also be required.

For more information you can consult all the documentation on the European Commission's website. 

You can also contact Jaylo's team of professionals specialised in customs management, who will help you and try to resolve any doubts you may have regarding compliance with these new regulations.