What you need to know about the first phase of CBAM

CBAM has been launched in Europe on October 1: What you need to know about the initial phase

Importers must submit their first report on the carbon value of goods before January 31, 2024

CBAM was officially launched in Europe on October 1, marking a significant start in implementing the Carbon Border Adjustment Mechanism (CBAM). This is a crucial part of the fight against carbon emissions and simultaneously plays a central role in the European Union's journey towards climate neutrality by 2050.

According to information from the spokesperson of the European Commission, Daniel Ferri, the transition phase of CBAM started on October 1, and by 2026, when carbon taxes officially take effect, importers must have CBAM certificates for their products. During this phase, items such as cement, iron, steel, aluminum, fertilizers, electricity, and hydro will be included without facing financial penalties.

In particular, businesses will need to report on the carbon emissions into the environment during the production process before January 31, 2024. According to Ferri, the amount of carbon tax will reflect the "carbon content" of the goods, meaning the amount of CO2 emissions generated during production. CBAM is a crucial tool for the EU in the fight against carbon emissions and is a central factor in achieving the goal of climate neutrality by 2050.

"CBAM will help the European Union implement climate policies and prevent the possibility of relocating production of goods to other countries with lower green standards," he said.

According to him, the introduction of CBAM is carried out in accordance with the rules of the World Trade Organization to encourage the global industry to adopt cleaner and more sustainable technologies.

Ferry emphasizes that the transition phase will allow all importers to familiarize themselves with the new rules and adapt to their implementation, especially with the assistance of the European Commission.

He further states that CBAM will ensure that products manufactured by EU businesses adhering to high environmental standards will not be squeezed out of the market. Ultimately, in some countries, less attention to environmental protection and the production of goods may be cheaper due to the use of outdated, carbon-intensive technologies. Thanks to CBAM, it will make no sense for EU industrial enterprises to shift production capacity to countries with less stringent environmental requirements, known as carbon leakage, to reduce production costs.

Prior to this, Naan wrote that the European Commission had announced "Regulations on the Implementation of CBAM" related to reporting obligations and rules of the carbon adjustment mechanism for imported goods.