The EU Carbon Border Adjustment Mechanism

The Carbon Border Adjustment Mechanism (commonly referred to as CBAM) is intended to complement the EU’s Emissions Trading System (ETS) by subjecting the import of certain products from third countries (i.e. non-EU and non-EFTA) to a carbon levy linked to the carbon price payable under the ETS.

Currently, this mechanism is targeted towards a number of product categories, including iron, steel, cement, fertilisers, aluminium, electricity as well as hydrogen. Further scope extensions including additional type of goods are expected to be determined by 2026.

On 17 August 2023, the EU Commission adopted its implementing regulation laying down reporting obligations applicable during the CBAM transitional period. During this transitional period, namely the period from 1 October 2023 to 31 December 2025, importers are required to maintain import records and submit quarterly reports containing the following data:

• quantities of CBAM goods imported during the quarter, specified per country of origin per production site where the goods are produced;
• the embedded direct (and, where applicable, indirect) greenhouse gas emissions thereof; and
• (if applicable) the carbon price due in the country of origin.

A number of alternatives may apply in the event of challenges with obtaining the relevant data during this transitional period.

Importers within scope of the CBAM regulations are required to register with the responsible national authority as a declarant for CBAM purposes. The national competent authority for CBAM in Malta is the Malta Resources Authority (MRA) and declarants are required to nominate a person, or persons, to act as the Authorised Representative on their behalf for the submission of CBAM reports.

Businesses which could fall within the scope of CBAM are strongly advised to get up to speed and ensure that they are complying with the applicable data collection and reporting requirements.