Summary of European Commission guidance on the EU CBAM for UK exporters

22 January 2024

 

On 1 October 2023, the European Union’s Carbon Border Adjustment Mechanism (CBAM) entered into application in its transitional phase. During the transitional phase, importers of CBAM goods in the EU are required to report a set of data, including emissions embedded in their goods. The first quarterly report is for the period October to December 2023, with the report due to be submitted on the CBAM Transitional Registry by 31 January 2024.

This page is intended to help UK exporters of CBAM goods to identify relevant EU guidance and information during the transitional phase. This summary does not constitute legal advice and is provided for general information purposes only. If exporters require specific legal advice they should contact a specialist legal adviser. Guidance produced by the European Commission is available on the European Commission website. Please note that EU guidance may be amended over time.

Who EU guidance is for

The European Commission have outlined that the EU CBAM will initially apply to imports of certain goods and selected precursors whose production is carbon intensive and at most significant risk of carbon leakage. The Commission have identified the following sectors as initially within scope during the transitional phase of the EU CBAM:

  • iron and steel
  • aluminium
  • cement
  • fertilisers
  • electricity
  • hydrogen

If you are a UK business exporting products or precursors to the EU in these sectors, you should review guidance provided by the EU to understand whether businesses you export to are in scope of the EU CBAM.

What you need to know now

Your EU customers will need to begin reporting greenhouse gas emissions on your exports in scope of the EU CBAM on a quarterly basis from 1st October 2023. The EU importer (or ‘reporting declarant’) must provide a ‘CBAM report’ on a quarterly basis, to the European Commission via the CBAM Transitional Registry, by the end of the month following the end of the quarter. However, EU importers may ask you for information to help them calculate the embedded emissions of the products you export to them. UK exporters may wish to speak to their importing counterparts to understand what information importers need in order to meet their CBAM obligations.

Information requests may also be directed to UK producers whose products are purchased by clients who themselves manufacture CBAM goods, and products may serve as “precursor” for their CBAM goods, which are subsequently exported to EU countries. Also, if you sell your products to traders who then sell them to EU customers, your goods may fall under the CBAM. The European Commission have defined relevant precursor materials as simple or complex goods which have embedded emissions, and which are identified as being within the system boundaries for the calculation of embedded emissions of a complex good. Further information on relevant precursors can be found in Annex II (Part 3) of the Commission Implementing Regulation (EU) 2023/1773.

There are some additional qualifying parameters that the EU importer needs to report under the CBAM. These depend on the goods produced. For example, for cements imported, the total clinker content needs to be reported; for mixed fertilizers the contents of the different forms of nitrogen, etc. UK exporters of products in scope may be asked to identify relevant parameters required for monitoring and determine monitoring methodologies for each. Companies may also be asked to collect information on any carbon price due or paid.

There will be no financial adjustment for the embedded emissions during this phase, however penalties may be imposed on EU importers, for example for failing to submit the required quarterly CBAM reports.

Preparing for information requests

A guidance document for installation operators outside of the EU has been provided by the European Commission.

A number of reporting derogations are in place during the transitional phase. For example, in order to provide EU importers with the data on the embedded emissions of their goods, UK businesses will be able to use existing domestic reporting until 31 July 2024, or UK ETS reporting until 31 December 2024.

Future EU CBAM Phases

From 2026, the definitive period of the CBAM will apply. That means from 1 January 2026 onwards, EU importers will have to bear a “CBAM obligation” in the form of certificates, which they purchase at the average price of EU Emissions Trading System allowances, for every CBAM good imported into the EU. There will be a phase-in with increasing coverage of embedded emissions by the CBAM obligation from 2026. The full embedded emissions will only be covered from 2034 onwards.

More information

The implementation of the EU CBAM requires the involvement of the National Competent Authorities (NCAs) of the 27 EU Member States. The European Commission has published a list of NCAs for the EU CBAM. If exporters are experiencing issues in specific jurisdictions or export markets, you may wish to consider where relevant NCAs may be offering additional support, including potential guidance or helplines.

You can find further information about the reporting requirements during the transitional period on the European Commission website. Exporters are encouraged to review Commission guidance for the latest information.

 

Kindly supplied by GOV.UK

 

Contact us for expert advice and effective international trade services to help grow your business. Attend our CBAM: Policy, Transition and Compliance Online Workshop on 30 March 2024 for more.

 

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