European Council votes to complete CBAM legislation

27/04/2023

The Council of the European Union (EU) voted on April 26, 2023 to pass the Carbon Border Adjustment Mechanism (CBAM). The CBAM is a new EU policy that will put a price on carbon emissions from imported goods. The CBAM is designed to prevent carbon leakage, which is the phenomenon of companies moving their production to countries with lower carbon prices.

The CBAM will be implemented in two phases. The first phase, which will start on October 1, 2023, will require importers of certain goods to report the carbon content of their imports. The second phase, which will start on January 1, 2026, will require importers to pay a carbon adjustment payment for goods that have a high carbon content.

The European market believes that the EU Council may delay the implementation of the CBAM until the first quarter of next year. However, the implementation of the CBAM in the EU is imminent. Therefore, industries exporting to Europe should start preparing for the CBAM now.

Companies that export goods to the EU will need to collect data on the carbon content of their products. This data can be collected from a variety of sources, such as the company’s own emissions data, the emissions data of its suppliers, or the emissions data of the EU’s Emissions Trading System (ETS).

Once the companies have collected the data, they will need to submit a declaration to the EU. The declaration will include information on the carbon content of the products, the country of origin of the products, and the price of the products.

The EU will use the information from the declarations to calculate the carbon adjustment payment. The carbon adjustment payment will be based on the difference between the carbon price in the EU and the carbon price in the country of origin of the products.

The CBAM is a complex regulation, but it is important for companies that export goods to the EU to understand the requirements. By preparing for the CBAM now, companies can avoid any disruptions to their business.

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