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Read complete documentation: The CBAM Regulation (EU 2023/956) officially came into force the day after its publication in the Official Journal of the EU on May 16, 2023.
The CBAM Regulation, or Carbon Border Adjustment Mechanism, represents a significant step towards mitigating climate change and promoting sustainable trade practices in the European Union. By applying a carbon border adjustment, the CBAM aims to level the playing field for imported products, ensuring that EU businesses are not put at a competitive disadvantage due to differences in costs associated with carbon emissions.
Scope of the CBAM Regulation:
The CBAM will affect a variety of imported products, including iron and steel, cement, fertilizers, aluminum, hydrogen, and electricity, among others. These products are subject to the EU’s carbon pricing rules and will be required to purchase certificates equivalent to the carbon price they would have paid if they had been produced in accordance with these rules.
Obligations During the Transitional Period:
During the transitional period of the CBAM, which spans from October 1, 2023, to the end of 2025, EU importers are responsible for collecting data on the emissions embedded in their imports and reporting on these emissions. However, during this period, they will not be required to make payments or adjustments.
Full Implementation of the CBAM:
From 2026 onwards, the CBAM will be implemented more comprehensively. EU importers will need to register with national authorities and purchase CBAM certificates to offset the carbon emissions embedded in their imports. This system will ensure that the carbon price of imports is equivalent to the carbon price of domestic production, thereby promoting fairness and sustainability in international trade.
Conclusions:
The CBAM Regulation represents an innovative approach to addressing carbon emissions associated with international trade. By leveling the playing field for imported products, the EU is demonstrating its commitment to climate action and promoting responsible trade practices. With the full implementation of the CBAM, it is expected that businesses will adapt to stricter sustainability standards, benefiting both the environment and the global economy.
