The Carbon Border Adjustment Mechanism (CBAM) is an EU regulation that requires importers of certain goods to report the embedded carbon emissions of these goods. The aim is to ensure that goods produced outside the EU face the same carbon costs as products made within the EU. This approach promotes fair competition and encourages cleaner production methods globally.
The CBAM will be introduced in two phases:
- Transitional phase (from October 2023 to end of 2025): Designed as a “learning phase”, during which importers are required to report the emissions embedded in the goods they bring into the EU on a quarterly basis, without paying a financial adjustment for the embedded emissions.
- Implementation phase (starting on 1 January 2026): Importers will need to buy CBAM certificates to cover these emissions, aligning costs with the EU’s carbon pricing rules (EU Emissions Trading System ETS). In addition, from 2026 onwards importers have to report on a yearly basis.