The European Commission has adopted rules governing the implementation of a system that will eventually lead to the payment of taxes on some carbon-intensive imports.

The Carbon Border Adjustment Mechanism (CBAM) is aimed at reducing ‘carbon leakage’, which occurs when EU-based companies move production abroad to take advantage of lower environmental standards, or when EU products are replaced by more carbon-intensive imports.

It also aims to encourage cleaner industrial production in non-EU countries.

During a transitional phase, which starts on 1 October of this year and runs until the end of 2025, importers will not have to pay any financial penalties.

Reporting and methodology

The regulation published today (17 August) outlines reporting obligations for EU importers of CBAM goods, as well as the methodology for calculating embedded emissions released during the production process of such goods.

Goods covered by the scheme include carbon-intensive products, such as cement, iron and steel, aluminium, fertilisers, electricity and hydrogen.

The commission has also published guidance for EU importers and non-EU producers on the practical implementation of the new rules.

While importers will be asked to collect fourth-quarter data as of 1 October 2023, their first report will not have to be submitted by 31 January 2024.