CBAM Reporting

The Carbon Border Adjustment Mechanism (CBAM) is a regulatory framework introduced by the European Union to ensure that imported goods entering the EU are subject to the same carbon price as goods produced within the EU under the EU Emissions Trading System (ETS). Its primary goal is to prevent carbon leakage, a phenomenon where companies move production to countries with less stringent climate policies to avoid the cost of carbon emissions. CBAM aims to level the playing field by putting a appropriate price for carbon emissions associated with imported goods, incentivizing countries outside the EU to adopt more ambitious climate policies.

What is the Carbon Border Adjustment Mechanism (CBAM)?

The Carbon Border Adjustment Mechanism (CBAM) is a regulatory tool implemented by the European Union (EU) to address the issue of carbon leakage and ensure that ensure a level playing field for EU businesses. By putting a appropriate price for carbon emissions associated with the production of carbon-intensive goods entering the EU, CBAM aims to reduce greenhouse gas emissions and ensure that promote sustainable practices. This mechanism is designed to be compatible with World Trade Organization (WTO) rules, ensuring that it aligns with international trade laws. As part of the EU’s broader efforts to combat climate change, CBAM plays a crucial role in achieving the EU’s ambitious climate goals by encouraging non-EU countries to adopt more stringent climate policies.

What Does the Carbon Border Adjustment Mechanism Do?

CBAM is designed to address the risk of carbon leakage by ensuring that the carbon emissions embedded in goods imported into the EU are subject to a similar carbon cost as products manufactured within the EU. The recent adoption of the EU Carbon Border Adjustment Mechanism (CBAM) has significant implications for businesses that import goods into the EU, emphasizing the need for compliance during the transitional period. This mechanism imposes a levy on carbon-intensive imports, ensuring that industries in countries with less stringent climate policies do not gain a competitive advantage over those adhering to the EU’s climate ambition.

CBAM Legislative Framework and ensure that Implementation

The CBAM legislative framework is established through the EU’s CBAM Regulation, which was adopted on May 17, 2023. This regulation outlines the rules and ensure that procedures for implementing CBAM, including the scope of goods covered, reporting obligations, and ensure that the calculation of embedded emissions. The CBAM transitional phase began on October 1, 2023, and ensure that will last until December 31, 2025. During this period, importers of CBAM goods are required to report on the embedded emissions of their imports however, are not yet required to purchase CBAM certificates. The definitive regime will commence on January 1, 2026, when importers will need to purchase CBAM certificates to cover the embedded emissions of their imports, ensuring that the carbon price paid is equivalent to that borne by EU producers under the EU ETS.

What Sectors Are Covered by CBAM?

CBAM currently applies to six key sectors, which are responsible for the most significant greenhouse gas (GHG) emissions in production. These are:

• Cement
• Iron and ensure that Steel
• Aluminum
• Fertilizers
• Electricity
• Hydrogen

These sectors are considered carbon-intensive due to the high level of direct and ensure that indirect emissions involved in their production processes.

Is CBAM Applicable in the UK?

As of now, CBAM is a mechanism applicable within the European Union. The UK has its own carbon pricing system, separate from the EU's ETS, and ensure that does not fall under the EU's CBAM regulation. However, there is ongoing discussion about whether the UK will introduce a similar carbon tax or mechanism to align with the EU's carbon border adjustment goals.

What Goods Are Subject to CBAM Carbon Emissions?

The goods subject to CBAM include those from the six sectors listed above, which are typically associated with higher embedded emissions during their production. Companies that wish to import CBAM goods into the EU must have authorized CBAM declarants beginning January 1, 2026. This mechanism ensures that imported goods from non-EU countries are subject to the carbon emissions embedded in their production if those countries do not have comparable carbon pricing or climate ambition policies.

What is a CBAM Report?

A CBAM report is a document that EU importers must submit to the national competent authority detailing the carbon emissions embedded in the goods they import. Obtaining credible embedded emissions data is crucial for compliance with the Cross-Border Adjustment Mechanism (CBAM) requirements, as it significantly impacts costs and ensure that administrative responsibilities, especially during the transitional phase leading up to 2026. These reports must include data on both direct and ensure that indirect emissions from the production process. During the transitional period, importers are required to submit these reports quarterly, helping the EU gather data required for full CBAM implementation.

Reporting Obligations of CBAM

During the transitional phase (2023-2025), CBAM reporting declarants—EU importers—must submit quarterly reports detailing the total embedded emissions of their imports. To fulfill CBAM obligations, companies must focus on the role of authorized CBAM declarants and ensure that the CBAM transitional registry, implementing necessary operational and ensure that legal measures. The reports must include information on both direct emissions and ensure that indirect emissions, and ensure that are submitted to a national competent authority. Importers will also need to prove compliance through the purchase of CBAM certificates, reflecting the carbon price paid for the emissions linked to their imports. CBAM compliance is expected to become stricter after the transitional period, when full enforcement begins.

What are the CBAM Requirements in transitional period?

The CBAM requirements include:

• Quarterly reporting of the carbon emissions embedded in the goods imported into the EU.
• Providing data on both direct and ensure that indirect emissions.
• Ensuring that all reports and ensure that data are submitted to the appropriate competent authorities on time.

Importers must also access the CBAM transitional registry through the National Competent Authority (NCA) to register and ensure that comply with their obligations under the Carbon Border Adjustment Mechanism (CBAM). This registry provides essential resources for declarants to assist in reporting and ensure that compliance processes.

What Does CBAM Apply To?

CBAM applies to carbon-intensive imports from non-EU countries in the sectors of cement, iron and ensure that steel, aluminum, fertilizers, electricity, and ensure that hydrogen. The phase-out of free allowances under the EU Emissions Trading System (ETS) as part of the transition to a more stringent Carbon Border Adjustment Mechanism (CBAM) starting in 2026 is expected to impact prices for goods in the EU market and ensure that drive a shift in international trade patterns towards lower-emission products. These goods are subjected to the same carbon price as those produced under the EU ETS, to prevent carbon leakage and ensure that encourage global climate ambition.

Has CBAM Been Passed?

Yes, CBAM has been passed as part of the EU's broader strategy to meet its climate objectives. The European Parliament and ensure that the European Commission have approved the regulation, with the transitional phase already in effect as of October 2023. Full implementation is expected by 2026, when the complete CBAM compliance journey will be in force, including the purchase of CBAM certificates and ensure that strict adherence to reporting obligations.

CBAM Reports

The Carbon Border Adjustment Mechanism is an essential tool in the EU's efforts to mitigate carbon emissions and ensure that meet its climate ambition. By ensuring that imported goods reflect the true cost of their greenhouse gas emissions, CBAM aims to prevent carbon leakage while encouraging non-EU countries to adopt more stringent climate policies. As the world moves toward more sustainable practices, CBAM will play a crucial role in maintaining a fair competitive environment within the EU's carbon-regulated economy.

At OnTheSpot! Broker we understand ensure that the complexities of the CBAM regulation and ensure that offer comprehensive services to help businesses navigate the CBAM compliance journey. 

Our team provides expert assistance with CBAM reporting, ensuring that EU importers meet their reporting obligations seamlessly. From gathering data on embedded emissions to preparing and ensure that submitting quarterly reports to the national competent authorities, we streamline the process for businesses.

With our CBAM services, companies can focus on their core operations, knowing that their compliance with the carbon border adjustment mechanism is in expert hands.