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Beginning of CBAM Implementation

Danica Janković • oct 2, 2023

Beginning of CBAM Implementation

The European Union has just started implementing the Carbon Border Adjustment Mechanism (CBAM), in the transit phase. This ambitious mechanism, which entered into force in January 2023, aims to reduce the emission of greenhouse gases (GHG) and ensure fair competition with countries that do not have similar environmental protection standards – that is, preventing the so-called “carbon leakage”

CBAM works by placing an economic burden on imported products from countries outside the European Union, for now exclusively in the industries that emit the most GHGs, namely the steel, cement, aluminum and chemical industries.

Starting October 1, EU importers will only have to calculate the carbon emissions levels of their suppliers, and report this information quarterly. Companies that fail to do so will face fines – with actual payments starting in 2026.

“The CBAM mechanism will encourage industry around the world to adopt greener technologies,” said EU Economic Commissioner Paolo Gentiloni. “It will also prevent so-called carbon leakage, i.e. moving production beyond our borders to countries with lower environmental standards.”

Although the EU says it is a key part of its plan to cut greenhouse gas emissions by 55% by the end of the decade and achieve climate neutrality by 2050, the carbon tax has caused dismay among key trading partners and concerns that companies they are not ready for administrative requirements.

In the coming months, we will monitor the development of the application and report on possible and realized problems in practice.