Update on the EU Carbon Border Adjustment Mechanism (CBAM)

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Update on the EU Carbon Border Adjustment Mechanism (CBAM)

European Parliament and the Council of the EU reached a Provisional Agreement on the CBAM

The European Parliament and the Council of the EU reached a provisional agreement on the CBAM, postponing the starting date of its transitional period to 1 October 2023. Please continue reading to learn about the key details of this agreement.

19 december 2022

Background

On 13 December 2022, the Council of the EU and the European Parliament reached a provisional agreement on the CBAM. The agreement, however, still needs to be confirmed and formally adopted by both institutions before it becomes final. Some aspects of the CBAM, such as the length of the transitional period and its full phase-in, have been agreed upon on 17 December 2022 in the parallel legislative process on the reform of the EU Emissions Trading System.  

While the text of the CBAM legislation is still being finalized, several important details of the provisional agreement have been released. They are summarized below.

The main details of the provisional agreement on the CBAM

  • The CBAM transitional period is to begin on 1 October 2023, rather than the earlier expected start on 1 January 2023. 
  • The go-live of CBAM is now planned in 2026. Over a period of 8 years, CBAM will be phased-in in parallel with the gradual phase out free allowances granted under the EU ETS.
  • The initial product scope of the CBAM will include the groups of products proposed by the European Commission (that is, iron and steel, cement, fertilisers, aluminium, and electricity), as well as hydrogen, some precursors and a limited number of downstream products. Indirect emissions will, under certain conditions, also be covered. 
  • Other products previously proposed for inclusion by the European Parliament, such as chemicals and polymers, are currently not included in the product scope. The expansion of the CBAM to cover such products is to be assessed by the European Commission by the end of the transitional period. 
  • The governance of the CBAM will be centralised, with the European Commission directing most of the tasks pertaining to its implementation.

Impact on business

The postponement of the CBAM transitional period to 1 October 2023 provides businesses with more time for preparation. In terms of its impact across industries, certain sectors, such as chemicals and plastics, will not (at least for the time being) be covered by the CBAM. 

On the other hand, following this provisional agreement, the compliance requirements of the CBAM may be said to have increased, given the inclusion of indirect emissions and the resulting complexity of their calculation and reporting. Businesses are advised to begin their organizational preparations as soon as feasible and assign roles and responsibilities within their organization for the emissions data collection and managing compliance with the CBAM.

How we can help

Deloitte’s Global Trade Advisory specialists are part of a global network of professionals who provide specialised assistance in global trade, customs and CBAM matters. 

Our professionals can support in carrying out CBAM ‘quickscan’ to determine the impact of CBAM on your business, carry out a review on available emissions data, and create a tailor made action plan to ensure your business is ready for both the CBAM transitional period and the CBAM ‘go-live’.  

If you have questions about the CBAM and its impact on your business including our capabilities for assistance in this regard, do not hesitate to contact us.

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