Climate change is already fundamentally affecting and will continue to affect our lives and the lives of future generations. In this context, the European Union has taken ambitious action to reduce greenhouse gas emissions and achieve carbon neutrality by 2050. One of the key tools for achieving these goals is the Carbon Border Adjustment Mechanism (CBAM), a crucial part of the Fit For 55 legislative package, which is a set of measures to reduce greenhouse gas emissions by 55% by 2030 compared to 1990 levels.
WHAT IS THE CBAM?
The CBAM is a mechanism used to reduce the carbon footprint of goods imported from third countries. This mainly concerns greenhouse gas emissions associated with production, transport and distribution. These emissions are not limited to the EU but are often generated in other parts of the world where environmental standards may be more benign. The CBAM is designed to ensure that importers are also held responsible for these emissions and that products imported into the EU from third countries meet the same emission standards as goods produced in the EU.
TIME HORIZON FOR IMPLEMENTATION
The CBAM will be rolled out in two phases. During a transitional period from 1 October 2023 to 31 December 2025, importers (so-called CBAM declarants) will be obliged to submit regular reports to the CBAM system. In the meantime, these importers will not have to pay the carbon duty or retire (issue) CBAM certificates. The sharp phase will start on 1 January 2026, under which declarants will already be obliged to purchase and retire CBAM certificates based on the actual carbon footprint of the imported goods.
CBAM certificates will be sold by Member States on a common central platform. The price of these certificates will be set weekly and should reasonably reflect the auctioned price of emission allowances.
CBAM DECLARATION AND REGISTRATION
One of the key aspects of the CBAM is the requirement for declarants to declare, among other things, the quantity of goods imported and the greenhouse gas emissions (carbon footprint) of goods imported into the EU. This information is essential to determine the number of CBAM certificates required to offset the emissions associated with imports. For the time being, the CBAM will cover a total of seven categories of goods (cement, electricity, fertilisers, aluminium, hydrogen, iron and steel), but it is expected that more categories will be added.
Operators of facilities in third countries that produce goods for export to the EU will be required to register in the CBAM central register. The registration will include information on the operator, the exact location of the facility (GPS coordinates) and the main economic activity. Registration is a necessary step to ensure the transparency and efficiency of this mechanism.
SANCTIONS
Manufacturers and importers must strictly comply with their obligations. Approved declarants will be required to retire CBAM certificates corresponding to the emissions of goods they have imported into the EU by the end of May each year. If they fail to comply with this obligation, they will face heavy fines. These fines should be the same as the amount under Article 16(3) and (4) of Directive 2003/87/EC, namely EUR 40 for each tonne of carbon dioxide equivalent emitted for which CBAM certificates have not been excluded.
CONCLUSION
At present, it is being decided which competent authority will be responsible for CBAM in the Czech Republic. In the meantime, it is important to identify whether the obligations arising from Regulation (EU) 2023/956 of the European Parliament and of the Council of 10 May 2023 establishing a carbon border adjustment mechanism will also apply to your company, and to prepare for the recording and processing of reports.
If you have any questions about how to prepare for the new regulation, please do not hesitate to contact us. We will be happy to help you identify your obligations under this regulation and support you in preparing the necessary reports.