Valpak Consultant, Harry Penney, breaks down the EU's Carbon Border Adjustment Mechanism (CBAM), a cornerstone of sustainable trade compliance under the EU's climate agenda. From understanding carbon accountability to key deadlines and practical business implications, this blog offers a clear roadmap to navigate CBAM's requirements while aligning with global sustainability goals.
As the EU advances their ambitious climate objectives, companies worldwide face new trade regulations that aim to curb carbon emissions on a global scale. A central piece of this effort is the EU’s Carbon Border Adjustment Mechanism (CBAM), a regulatory framework that enforces carbon accountability on goods imported into the EU. The implications for businesses engaging in EU trade are significant. CBAM mandates stringent carbon emissions reporting and will eventually impose costs on high-carbon imports. However, navigating CBAM can be a streamlined path to sustainability with careful preparation and the proper support, aligning your business with the mission to reduce carbon emissions.
CBAM is the EU’s response to the issue of ‘carbon leakage’—when businesses relocate production to countries with less stringent carbon controls to avoid local carbon costs. Through CBAM, the EU ensures a level playing field by pricing the carbon content of specific imports. This not only discourages carbon leakage but also promotes cleaner industrial production both within and outside EU borders, encouraging a fair and sustainable trading environment.
The industries considered ‘in-scope’ are cement, iron, steel, aluminium, fertilisers, electricity, and hydrogen importers. The goods considered ‘in-scope’ in these industries could be raw materials like iron ore or finished goods like steel beams.
If your business exports to the EU or sources goods from non-EU suppliers, CBAM will likely impact you. Here’s how:
Understanding CBAM’s timeline is essential for staying compliant. Here’s an overview of the most important milestones:
The CBAM legislation is currently in the transitional period, which began on 1 October 2023, and extends to the end of 2025. This period focuses on monitoring and reporting. During this phase, importers are required to report greenhouse gas emissions embedded in the production of imported goods, but they do not yet have to pay financial adjustments. This period allows companies and authorities to adapt to the reporting requirements, gather emissions data, and refine methodologies.
The complete CBAM system begins in 2026, marking the start of mandatory CBAM certificates for emissions-heavy imports. During this definitive period, reporting requirements will intensify, and companies must purchase certificates corresponding to their goods’ embedded emissions. Additionally, a similar mechanism in the UK is anticipated by 2027, meaning that businesses trading internationally must be prepared for a changing regulatory landscape.
Our Consultancy team is here to make CBAM compliance straightforward, allowing you to focus on your core business.
Our tailored support includes the following:
The EU CBAM is reshaping how companies approach compliance and sustainability. Our EU CBAM Compliance Service allows you to stay ahead of these changes, keeping you compliant, informed, and strategically positioned in a more sustainable marketplace.