Carbon border adjustment mechanism CBAM ensures fair competitive conditions for climate-friendly feedstock production in the EU | Umweltbundesamt

Jürgen Landgrebe, Head of the “Climate Protection, Energy, German Emissions Trading Centre” department at the German Environment Agency (UBA): “It's important that all obligated parties register in the CBAM⁠ transitional registry and take their obligation to submit reports seriously. This is the only way to benefit from the advantages of carbon border adjustment and ensure fair competition for products that are subject to European emissions trading. The smaller the carbon footprint of a product, the cheaper it is to import into the EU.

Objective

The aim of the carbon border adjustment mechanism is to harmonise the conditions for production within and outside the EU and thus ensure fair competition for products that are subject to EU emissions trading (EU ETS 1). Currently, there is only a quarterly obligation to report on the import of certain emission-intensive goods into the EU. From 2026, emission allowances must also be purchased and surrendered in a further step. The fewer emissions associated with the production of imported CBAM products, the fewer emission allowances will have to be surrendered. In Germany, the German Emissions Trading Authority (DEHSt) at the German Environment Agency (UBA) implements the CBAM.

Current transition phase in the CBAM

The carbon border adjustment mechanism begins with a transitional period (October 2023 to the end of 2025) without financial obligations and with simplified reporting obligations for those affected. It will serve to familiarise all stakeholders with the system, gather experience and data and optimise the final design from 2026.

From the start of the regulatory phase in 2026, there will only be an annual reporting obligation. However, importers will then have to purchase and surrender CBAM certificates that correspond to the emissions of the imported goods. The CBAM price will then be based on the average auction prices in European emissions trading. The obligation to surrender CBAM allowances will gradually increase as the free allocation to EU producers of the goods in question is reduced. By 2034, free allocation for these products will be completely phased out and the CBAM obligation will apply to 100 per cent of emissions. Carbon prices paid in the countries of origin will be recognised under certain conditions and taken into account in the obligation to surrender CBAM allowances.

Further information:

Responsibilities of importers subject to the reporting obligation

Since October 2023, importers have been required to submit a CBAM report to the European Commission for each quarter in which they have imported products subject to CBAM into the EU – no later than one month after the end of the quarter. Imports whose value of goods is negligible, i.e. not exceeding 150 euros customs value per consignment, are exempt. For the first report, which was due on 31 January 2024, there is the possibility to apply for an extension. For CBAM reporting, the Commission provides the so-called CBAM transition register as software. The CBAM report contains information on the quantity of goods and the producers as well as the direct and indirect emissions and the carbon price paid in the country of origin. The Commission provides information and assistance on the Internet to facilitate the reporting obligation, including, for example, a list of default values that may be used until 31 July 2024 for simplification purposes.

Importers can and must check for themselves which goods they are obliged to report. When importing into the European Union, the importer must compare the code according to the combined Nomenclature ⁠(CN code) of the imported goods with the list in Annex I of the CBAM Regulation. In its guidance document on CBAM implementation for importers, the European Commission provides step-by-step instructions on how to identify the goods concerned.

Tasks of the European Commission, the DEHSt and customs

The European Commission develops and operates the CBAM transitional register in which the companies subject to participation must submit their CBAM reports. It also provides information and training material for importers and producers in third countries. It identifies importers who are obliged to participate but have not submitted a CBAM report, as well as incorrect reports.

The German Emissions Trading Authority (DEHSt) at the German Environment Agency has been designated as the competent authority for CBAM in Germany since December 2023. It informs participating companies about their rights and obligations on its website and by newsletter. It tracks the missing importers reported by the Commission and can initiate correction procedures in the event of incorrect reports. If necessary, it initiates sanction proceedings.

The customs portal of the Generalzolldirektion (General Customs Directorate) is used to register CBAM declarants subject to reporting obligations in order to gain access to the CBAM transitional register.

Fit for 55

CBAM is part of the European “Fit for 55” package and complements the increasingly ambitious EU Emissions Trading Scheme (EU ETS 1). The border adjustment system combines protection against the shifting of CO₂ emissions abroad ("carbon leakage") with effective CO₂ pricing.