From October 1st, the transitional period of the application of the Carbon Cross-Border Adjustment Mechanism (CBAM), also known as the “European carbon tax”, begins.
We discussed the obligations of our companies – producers of electricity, steel, fertilizers and other CBAM products, what kind of control awaits them and what are the penalties for failing to report or undeclared carbon emissions with Gecić Law attorney Branko Gabrić.
What will the practical application of CBAM look like and what are the obligations of importers from the EU and producers of CBAM products from third countries in the transition period?
“In August of this year, the European Commission adopted the final rules on the manner and reporting during the transition period and thus answered the question of what the practical application of the CBAM regulation will look like. Ahead of us is a transition period that lasts from October 1st this year to December 31st, 2025.
During this period, companies that export their products to the European Union will have the obligation to measure their carbon dioxide emissions, and to report quarterly on emissions for product categories from the cement, electricity, iron and steel, aluminum, fertilizers and chemicals sectors. The transitional period provides time and opportunity for thorough preparation for the “definitive” period that begins on January 1st, 2026.
In a definite period, companies will have to buy CBAM certificates, where one CBAM certificate is equivalent to one ton of emitted carbon dioxide. Currently, one ton of emitted carbon dioxide in the EU is worth slightly more than 80 euros.”
The first quarterly CBAM reports should be submitted by January 31st, 2024. Who is obliged to prepare the report and what should be included in it?
“During the transition period, reporting entities will be required to submit a CBAM report no later than one month after the end of each quarter. The first CBAM report must be submitted by January 31st, 2024 in relation to imported goods during the fourth quarter of 2023, while the last CBAM report must be submitted by January 31st, 2026.
Reporting obligations are all importers of goods covered by CBAM with headquarters in a member state of the European Union. When the importer is not based in an EU member state, the CBAM report can be submitted by an indirect customs representative, who submits the CBAM report in his own name, but on behalf of the exporter from a third country.
In the transition period, the CBAM report will contain data such as the quantity of goods imported, total embodied carbon dioxide emissions, total indirect emissions and the carbon price already paid in the third country, if any. Of course, there are certain specificities depending on the type of product. During the transition period, there will be no mandatory verification of the CBAM report by an independent verifier, which will become mandatory during the definitive period.”
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