CBAM

Carbon Border Adjustment Mechanism

Do you import goods such as iron, steel, aluminium (as well as goods made from the raw materials mentioned), cement, fertiliser, electricity and hydrogen from non-EU countries?

If so, you will be affected by the new Carbon Boundary Adjustment Mechanism (CBAM) from October 2023.

This is associated with extensive reporting obligations for companies.

The EU Carbon Boundary Adjustment Mechanism (CBAM) is a new measure of the European Union to price the import of CO2-intensive goods from third countries. CBAM is intended to help achieve the European climate targets and strengthen the competitiveness of European companies.

How does CBAM work?

CBAM provides that importers of CO2-intensive goods from third countries must make an offset payment for the emissions of these goods.

The amount of the offset payment is determined on the basis of the CO2 price in the EU Emissions Trading Scheme.

What goods are affected?

CBAM is initially imported for the following goods and commodities therefrom:

  • Iron and steel
  • Cement
  • Aluminium
  • Fertilisers
  • Electricity

In the coming years, further goods are to be included in the scope of CBAM.

What are the benefits of CBAM?

CBAM is expected to bring the following benefits:

  • Increased climate change mitigation: CBAM is expected to help reduce emissions of CO2 in the EU.
  • Strengthened competitiveness of European companies: CBAM should help to ensure that European companies are not disadvantaged by the higher CO2 emissions of imported goods from third countries.
  • More revenue for climate protection: The revenue from CBAM is to be used to finance climate protection measures in the EU.

What are the disadvantages of CBAM for companies?

CBAM could have the following disadvantages:

  • Increased costs and additional bureaucratic work for companies: CBAM will lead to higher costs for companies, as they will have to pay compensation for the CO² emissions caused by their imported goods. Complex registration and reporting obligations will be imposed on the companies concerned.
  • Deferral of emissions: CBAM could lead to companies shifting their production to third countries in order to avoid the offset payments.

What exactly this means for you and how we can support you is explained below.

1. What does CBAM mean?

The EU’s aim with the new regulations is to ensure that non-EU goods from energy-intensive production that are brought into the free movement of goods in the EU are priced at the same CO² level as goods produced in the EU.

This is to compensate for the inequality between companies producing in countries with less demanding CO² targets and EU producers with high environmental requirements.

2. Who will be affected by the new “CBAM” implementing regulation?

CBAM will affect all companies based in the EU that import preliminary, intermediate or final products of iron, steel, aluminium, cement, hydrogen, electricity and fertilisers into the EU from non-EU countries.

3. When will the new implementing regulation enter into force?

CBAM will enter into force on 1 October 2023. The effectiveness of the regulations will be implemented gradually during a transitional period from October 2023 to the end of 2025 in order to make the financial impact calculable and predictable for companies.

4. What do I have to do during the transition phase?

The companies concerned must determine all direct and indirect CO² emissions that occur during the production of the above-mentioned imported goods.

The CO² emissions caused must be reported quarterly for the imported goods with the preparation and submission of a CBAM report to the Federal Environment Agency.

Result:

CBAM is a complex instrument that has both advantages and disadvantages. The EU will closely monitor the impact of CBAM and make adjustments where necessary.

 

Are you already prepared for the CBAM challenges ahead?
  • How does the measure affect the prices and availability of products and services?
  • Highlight your sustainability efforts to differentiate yourself from competitors who are not affected by CBAM.
  • Invest in climate change mitigation measures to minimise the impact of CBAM.

Good preparation for CBAM regulations can mitigate the negative impacts of the measures and secure competitive advantages for you.

Our advisors will be happy to support you in preparing and implementing the necessary process steps.

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