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Carbon Border Adjustment Mechanism (CBAM)

Carbon Border Adjustment Mechanism (CBAM) 

In 2023, the EU Commission introduced the Carbon Border Adjustment Mechanism (CBAM) within the EU-ETS to mitigate carbon leakage risks. Initially, until 2026, companies are required to report and confirm their emissions. Post-2026, they must acquire and cancel CBAM credits to cover their emission costs. This regulation presents significant challenges for businesses unfamiliar with market-driven environmental policies. Additionally, independent third parties must authenticate the data in CBAM declarations. 

Why choose Normec Verifavia?

  1. Assured compliance 
  2. Understanding and interpretation of largest sources of emissions 
  3. Better understanding of regulation 

Before the introduction of the Carbon Border Adjustment Mechanism (CBAM), companies importing goods from outside the EU enjoyed a competitive advantage by evading environmental and financial regulations related to greenhouse gas (GHG) emissions. This imbalance undermined the integrity of the EU’s emissions trading system (ETS) and disadvantaged industries within the EU that complied with stricter environmental standards. The CBAM targets carbon-intensive industries deemed most at risk of carbon leakage.  

Sectors and emissions covered by CBAM: 

  1. Cement: CO2 
  2. Electricity: CO2 
  3. Iron & Steel: CO2 
  4. Aluminum: CO2 + Perfluoro Carbons (PFC) 
  5. Fertilizer: CO2 + N2O 
  6. Hydrogen: CO2 

To fulfil their CBAM obligations, importers or indirect customs representatives must register as authorized CBAM declarants prior to the import of CBAM goods into the EU. For each calendar year, regulated companies must calculate the emissions embedded in imports following the methodology and report the results through the CBAM declaration by May 31st of the following year. Within these declarations, the importers may also claim a reduction of CBAM certificates to be surrendered when a carbon price has been effectively paid in the country of origin. Importers must receive access to the CBAM registry, the platform where data on embedded emissions is communicated to authorities and where CBAM certificates are bought, surrendered, and excess certificates are sold back to the authorities. 

The extent to which CBAM will affect a company depends on the products’ geographical location of production and the strength of the carbon policies in this location, e.g. ETS, carbon tax. Once fully phased in, the CBAM is expected to capture more than 50% of emissions covered by the ETS. 

Reporting: Until the end of 2024 companies can report their emissions in one of three ways: 

  1. full reporting according to the new methodology (EU method) 
  2. reporting based on an equivalent method 
  3. reporting based on default reference values 

As of 1 January 2025, only the EU method will be accepted, and estimates (including default values) can only be used for complex goods if these estimations represent less than 20% of the total embedded emissions. 

Credit purchase and retirement: 

From 2026 onwards, companies must declare the previous year’s quantity of imported goods and compensate the associated emissions with the purchase and surrender of CBAM certificates.  The price of CBAM certificates will depend on the average weekly auction price of EU-ETS allowances, momentarily around €85 per ton of CO2e and expected to range between €100 and €150 by 2030. 

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  1. Understanding sources of goods imported and countries’ environmental policy 

  2. Aggregating emissions associated with these goods 

  3. Report emissions in accepted format 

  4. Verify report with accredited verifier

  5. Submit report to EU registry 



Find answers to the most commonly asked questions

How do I know if CBAM concerns me?

All companies importing the CBAM-covered goods mentioned above are concerned with the regulation. Importing from the EEA and Switzerland (not UK) gives exclusion rights.  

How often must I report?

Reports are submitted quarterly no later than one month after the end of the quarter and modifications can be made up to two months after the end of the relevant quarter.  

What are the penalties for non-compliance?

Reporting declarants may face penalties ranging between 10€ and 50€ per tonne of unreported emissions. Reporting of embedded emissions in CBAM goods from 1 October 2023 is compulsory.  

  1. In the case of missing, incorrect, or incomplete CBAM reports, the National Competent Authority (NCA) may initiate a correction procedure, granting reporting declarants the possibility to rectify potential errors.  
  2. The NCA shall apply penalties apply where a) the reporting declarant has not taken the necessary steps to comply with the obligation to submit a CBAM report, or b) where the CBAM report is incorrect or incomplete, and the reporting declarant has not taken the necessary steps to correct the CBAM report after the competent authority initiated the correction procedure.