Carbon Border Adjustment Mechanism (CBAM)

One of the most talked about areas within cross-border trade is the introduction of the Carbon Border Adjustment Mechanism. This article looks at what it is, why it has been introduced and what steps businesses should take to ensure compliance

Contents

• What is the Carbon Border Adjustment Mechanism, and why is it being introduced?
• I’m based in Northern Ireland. Does this impact me?
• What goods does CBAM cover?
• What are the key dates?
• How do I know if my products are subject to CBAM?
• Are there any exceptions?
• Who is responsible for reporting?
• How do I report details of emissions?
• My business is based in Ireland. We import goods from outside the EU. What steps should we take?
• What information I should obtain?
• What if my supplier cannot / does not provide all the required information?
• A list of impacted commodity codes
• Does the UK have a version of CBAM?
• Useful Links

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What is the Carbon Border Adjustment Mechanism, and why is it being introduced?

The Carbon Border Adjustment Mechanism (CBAM) was introduced by the EU on 1 October 2023. The aim of CBAM is to ensure that businesses pay a fair price for all carbon emissions, and to help encourage both businesses and governments in non-EU countries to embrace cleaner production methods.

It is critical that businesses in Ireland understand this new mechanism and what actions they need to take to ensure compliance with all requirements.

I’m based in Northern Ireland. Does this impact me?

Currently there remains some uncertainty around how CBAM will be applied in relation to Northern Ireland. If you are based in Northern Ireland and you import goods from outside the EU which are classed as "At Risk" upon entry into Northern Ireland, you should continue to monitor for future developments regarding CBAM and Northern Ireland.

What goods does CBAM cover?

CBAM will initially cover imports of some of the most carbon intensive products. This includes:

• Cement.
• Iron and steel.
• Aluminium.
• Fertilisers.
• Electricity and hydrogen.

It is important to note that the scope of products covered by CBAM is anticipated to increase significantly over time.

What are the key dates?

CBAM is being introduced in two phases

Phase 1: Transitional Phase From 1 October 2023 to 31 December 2025. The first report submission for the quarter October - December 2023 is required by 31 January 2024.

Phase 2: From 1 January 2026. A new permanent system will be introduced whereby businesses are required to declare the annual quantity of goods imported into the EU and the associated level of greenhouse gas emissions. At this point businesses will be required to surrender a certain number of CBAM certificates depending on the level of greenhouse gas emissions of imported products.

How do I know if my products are subject to CBAM?

Whether a product is subject to CBAM will depend on its commodity code. If the commodity code used falls within the list of product specific codes impacted by CBAM, then businesses will need to comply with all reporting requirements.

If you are unsure about how to find a commodity code please see our helpful guide to commodity codes for more information.

A full list of commodity codes which are subject to CBAM requirements can be found below.

Are there any exceptions?

The only exceptions to CBAM requirements occur where the goods imported are valued at under €150, or goods of military use. 

Who is responsible for reporting?

The responsibility for reporting will lie with the Importer of Record upon entry into the EU. This can either be completed by an importer directly, or through an indirect customs representative.

More information about CBAM reporting requirements can be found on the European Commission website section about the Carbon Border Adjustment Mechanism.

How do I report details of emissions?

The European Commission has recently developed a new portal known as the CBAM Transitional Registry, which will be used to report details of emissions. This portal is monitored by both the commission and authorities in each member state including Ireland. This portal can be accessed through the European Commission TAXUD Authentication Portal.

Businesses seeking to login to this portal should use their existing EORI number as their ID when logging in.

My business is based in Ireland. We import goods from outside the EU. What steps should we take?

There are several actions which businesses who import goods from outside the EU should consider taking. These include:

• Checking Commodity Codes: The first action that businesses should consider taking with regards to CBAM is to make sure that are their commodity codes are correct. Once they have ensured that the correct codes are being used, they will then be able to determine which products are subject to CBAM requirements.

Note: In addition to CBAM requirements, choosing an incorrect commodity code can have serious legal consequences, and result in a business paying the incorrect amount of customs duty on imported products. For more information about how to choose the correct commodity code businesses should read our helpful guide to commodity codes.

• Identify key sources of supply chain risk: If importing goods into the EU it is important that businesses manage their supply chain risk by focusing on increasing the traceability and visibility of their supply chain. By having a high level of traceability businesses will find it much easier to identify any possible vulnerabilities thereby mitigating the possibility of supply chain disruption whilst also making it easier to demonstrate compliance with all CBAM requirements.
• Understand how to follow CBAM reporting requirements: CBAM is a new regulation, and this means a new process that businesses must follow. It is important that businesses take the time to proactively understand how to report their emissions details as part of the new requirements.
• Develop a carbon mitigation strategy: Going forward businesses in both Northern Ireland and Ireland should consider developing a business sustainability strategy that considers not just their supply chain, but all other aspects of business operations. This will not only help in ensuring compliance with legal requirements such as CBAM but also help provide a source of competitive advantage over other businesses.

What information I should obtain?

Businesses will need to be able to provide the following information when reporting under CBAM:

1. Commodity code and country of origin of goods.
2. Quantity of goods (in tonnes).
3. Details of any production routes.
4. Total emissions including direct emissions of the goods and any installation emissions.
5. Steel Mill ID (for steel goods only).
6. Indirect emissions data such as electricity consumption.

Whilst some of this information may be readily accessible, it is advisable that businesses importing into the EU engage with their suppliers to ensure that they are ready to provide this information.

What if my supplier cannot / does not provide all the required information?

If the information submitted regarding emissions is incomplete or incorrect then penalties may apply. This may make the cost of imports considerably more expensive.

A list of impacted commodity codes

Products which are classified under the following codes will be subject to CBAM requirements:

 

Does the UK have a version of CBAM?

The UK has recently announced their own version of CBAM, which will take effect from 1st January 2027.

Similar to the EU, UK CBAM will see the introduction of a levy on the import of certain carbon intensive products. Products covered under UK CBAM include:

• Cement.
• Iron and steel.
• Aluminium.
• Fertilisers.

Businesses in Northern Ireland should carefully monitor for future developments concerning impacted products or reporting requirements under UK CBAM.

Useful Links