What is CBAM?
As a key component of the European Green Deal and the Fit for 55 package, Carbon Border Adjustment Mechanism (CBAM) marks a significant milestone in European Union (EU) climate policy and introduces new regulatory obligations for international trade. Designed to combat carbon leakage, CBAM addresses the critical issue of companies potentially relocating production to regions with less stringent climate regulations. By imposing a carbon cost on imports into the EU from some of the most emissions-intensive industries, CBAM aims to level the playing field while promoting global climate action. The implementation of CBAM requires robust monitoring and reporting of emissions associated with imported goods and has a profound impact on industries and companies both inside and outside the EU.
Who does CBAM apply to?
CBAM applies to specific goods imported into the EU from third countries, targeting sectors at risk of carbon leakage such as iron and steel, cement, fertilisers, aluminium, hydrogen and electricity (on a first stage). These sectors are aligned with those covered by the EU Emissions Trading Scheme (ETS), ensuring consistency and effectiveness in tackling emissions. Complementing the ETS, CBAM applies equivalent rules to imports, reflecting the EU's commitment to reducing emissions from production processes at home and abroad.
What is the impact of CBAM?
CBAM will have a significant impact on the economies of third countries, particularly those that export heavily to the EU or have high industrial CO2 emissions. To mitigate this impact, countries may consider taking measures to reduce emissions and reduce their carbon footprint. Certain territories, such as Iceland, Liechtenstein, Norway, Switzerland, Büsingen, Helgoland, Livigno, Ceuta and Melilla, are exempt from CBAM rules.
How your CMS team can help?
CMS provides comprehensive legal assistance to both EU and non-EU companies in navigating the intricacies of CBAM Regulation. We offer clear, practical advice on understanding CBAM rules and requirements for each category of CBAM goods, managing reporting requirements, and developing robust strategies for seamless compliance. Our team, spread across various jurisdictions, is well-versed in sustainability and ESG-related regulations. Our proactive approach involves closely monitoring developments, updating our clients, and positioning ourselves as industry leaders in providing strategic advice.
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Assist clients with any CBAM-related questions, including but not limited to: - interpretation of the CBAM legislation;
- market practice; and
- correspondence with EU importers and authorities (including customs authorities and the EU Commission).
| Business operations and gap analysis.
Based on such gap analysis, we prepare tailored checklists and make recommendations to ensure data collection and calculation are in accordance with the Implementation Regulation and the reporting requirements thereunder. | Bespoke training sessions and workshops to explain CBAM requirements to client teams.
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Advise clients on best practices and provide ongoing compliance updates. For non-EU companies who are installation operators, we provide assistance to ensure they deliver correct and complete data to EU importers and customs representatives.
| Following the end of the transitional period, advise clients on how to become “authorised declarant” (starting from 1 January 2025) and the acquisition and surrender of CBAM certificates.
| Implementation of CBAM covenants within supply agreements, policies as well as terms and conditions, including providing guidance, customising provisions to meet specific business needs and ensuring compliance with regulatory standards. |
Exposed countries
Click here to view a selection of countries impacted by CBAM
Download the pdf version of the Carbon Border Adjustment Mechanism
Attachment
Carbon Border Adjustment Mechanism (CBAM)
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The CBAM – what is it and how will it affect the market?
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