On 18 April 2023, the European Parliament approved the text of the Regulation on carbon border adjustment mechanism (CBAM).
CBAM will cover the following sectors:
- metallurgy
- oil refining
- cement industry
- production of aluminium, basic organic chemicals, hydrogen, fertilisers and electricity
In sectors such as metallurgy, aluminium and hydrogen production, only direct CO2 emissions (Scope 1) will be considered, while in the other sectors indirect emissions will also be considered (Scope 2). By 2030, the СВАМ is to cover all sectors covered by Directive 2003/87/EC on greenhouse gas emissions trading.
The implementation will be as follows: the manufacturer of a product subject to the СВАМ will have to pay for the CO2 emissions released by its production when importing it into the EU by buying СВАМ allowances at a price formed by the EU greenhouse gas emissions trading market (EU ETS). In case of non-compliance – a fine followed by a ban on trading in the EU.
At the same time, from 1 October 2023 to 31 December 2025 a transition period will apply. During the transition period, the importer only reports on CO2 emissions and does not pay for them.
By 31 January 2024, the importer must submit the first quarterly CBAM report with the following data:
- the total quantity of each type of commodity, expressed in MW-h for electricity and in tons for other commodities, per facility producing the commodity in the country of origin
- the actual total emissions expressed in tons of CO2 emissions per MW-h for electricity or in tons of CO2 emissions per ton of each type of goods for other goods
- total indirect emissions
- the carbon price to be paid in the country of origin for the embedded emissions in the imported goods, subject to appropriate rebates or any other forms of compensation
From 31 December 2024 the manufacturer will be able to apply for registration in the CBAM electronic register and register an authorized CBAM declarant (importer), who will be provided with information on verified CO2 emissions from the production of goods. Such an authorized CBAM declarant must be approved (authorized) by the competent authority in the country of import.
For more information, please contact Asters' Counsel Anzhelika Livitska and Associate Daria Gafonova.
