The European Carbon Border Adjustment Mechanism (CBAM) entered into force on 1 October 2023. The full panoply of obligations will gradually start to apply during the so-called Transitional Phase through 31 December 2025. Importantly, EU importers will have to submit the first report under the CBAM shortly, by 31 January 2024, reporting on the scope of embedded emissions in certain goods they have imported during the first quarter year the CBAM has applied (1 October 2023-31 December 2023). This Client Alert informs about what EU importers need to report on by the end of the month, 31 January 2024. We take this as an opportunity to provide an overview of the new regulation and the obligations it sets out.
The following goods are covered by the CBAM if they are imported from outside of the EU:
Aluminum
Iron and steel
Fertilizers
Electricity
Cement
Hydrogen
The specific goods can be identified by their code under the EU’s Combined Nomenclature (CN-Code) listed in Annex I of the CBAM-Regulation. The importer must check and compare all imported goods against the CN-Codes in Annex I. By 2026, the EU Commission will examine whether the scope of the CBAM should be extended to include, for example, organic chemicals and polymers.