Carbon Border Tax 

Functioning of CBAM During Transitional Period

The CBAM transitional period from 1 October 2023 to 31 December 2025 is a pilot phase without financial consequences for the respective companies. Importers and indirect customs representatives report data on the volume of CBAM imports and the related embedded greenhouse gas emissions. Quarterly reports are submitted within a month of the quarter-end and may be corrected by the end of the next month. The CBAM reports submitted for Q4/2023 and Q1/2024 may be corrected by 31 July 2024. Failure to submit a CBAM report or submission of incorrect data is sanctioned with a fine of up to EUR 10-50 per tonne of unreported emissions.

From 1 January 2025, the EU Member States will grant the status of an “authorised CBAM declarant”. Importers and indirect customs representatives must apply for this status. Without granting the status of an authorised CBAM declarant, it will not be possible to import CBAM goods into the EU customs territory.

After the transitional period, the CBAM will be revised prior to the introduction of a permanent mechanism on 1 January 2026 to reassess the scope of products and the option of including other goods in the CBAM up to 2030.

Limits to Use of Default Reference Values

 A CBAM report based on default reference values published by the European Commission may only be submitted up to 31 July 2024. As of 1 August 2024, a CBAM report must be submitted using actual emission values calculated by and obtained from suppliers. 

Calculation and Reporting of Emissions Embedded in CBAM Goods

The calculation of greenhouse gas emissions embedded in CBAM goods is governed by Article 7 of the CBAM Regulation (2023/956) and Article 4 of the CBAM Implementing Regulation (2023/1773). This methodology is closely linked to the EU Emission Trading System (EU ETS). When calculating GHG emissions, the following three main flows must be taken into consideration:

Direct GHG emissions (emissions released during the production);

Indirect GHG emissions (emissions from electricity consumed during the production);

GHG emissions related to intermediate products (emissions from the production of intermediate products). 

Methods for calculating emissions embedded in CBAM goods are stated in Annex IV to CBAM Regulation 2023/956. CBAM Implementing Regulation 2023/1773 provides for some flexibility regarding the values used to calculate embedded emissions on imports during the transitional period.

Methods of emission reporting until the end of 2024 are as follows:

1. Full reporting using the new methodology (EU method);
2. Reporting based on an equivalent method, i.e. based on equivalent national systems of third countries – three options:
   • • Carbon pricing scheme where the installation is located; or
   • • Compulsory emission monitoring scheme where the installation is located; or
   • • Emission monitoring scheme at the installation, including verification by an accredited verifier;
3. Reporting based on default reference values (only until the end of July 2024).

As of 1 January 2025, only the EU method will be accepted. Estimates, including default values, may only be used for complex goods if these estimates represent less than 20% of the total embedded emissions. In December 2023, the European Commission published default values based on the Joint Research Centre’s (JRC) report.

Rules on Functioning of CBAM as of 2026

From 2026 onwards, only authorised CBAM declarants will be able to import CBAM goods into the EU customs territory. Such declarants will purchase CBAM certificates for the price calculated by the European Commission each calendar week as the average of closing auction platform prices of EU ETS allowances in accordance with EU Regulation No. 1031/2010. One CBAM certificate equals 1 tonne of emissions.

By 31 May every year (starting in 2027 for 2026), declarants will be required to report imports of CBAM goods into the EU for the preceding year. In addition, they will be required to report the total emissions embedded in such goods, the total number of CBAM certificates to be surrendered, and submit copies of verification reports. Declarants may request a reduction in the number of CBAM certificates to be surrendered if they are able to document that the carbon price has already been paid during goods production in a third country.

The CBAM introduction will run in parallel with the phasing out of free-of-charge allowances in the EU ETS from 2026 to 2034.

Carbon Border Tax in Slovakia 

In Slovakia, the competent CBAM authority is the Ministry of Environment of the Slovak Republic (“ME SR”). The ME SR closely cooperates with the Financial Directorate of the Slovak Republic, which regularly informs importers and indirect customs representatives of their obligations arising from EU CBAM legislation and sends data on imports of CBAM goods to the European Commission. The ME SR grants importers and indirect customs representatives based in the Slovak Republic access to the CBAM Transitional Registry based on an electronic application completed by importers or indirect customs representatives.