What is CBAM?
CBAM is part of the European ‘Fit for 55’ package and obligates companies that import high emission goods into the EU to purchase CBAM emission allowances to compensate for the difference between the CO2 price paid in the country of origin and the higher price of the allowances in the EU Emissions Trading System. The system affects a large number of industrial and trading companies.
CBAM has been introduced starting gradually in October 2023 in order to slowly familiarise participating companies inside and outside the EU with the reporting obligations and methods for determining embedded emissions in accordance with the requirements of the EU Emissions Trading Scheme. Initially, the instrument only applies to electricity, cement, iron and steel, aluminium, fertilisers and hydrogen. The processes used to manufacture these products are accompanied by particularly high CO2 emissions and therefore exposed to a high risk of carbon leakage (emission increase due to the relocation of industrial production abroad, where little or no CO2 pricing is applied to the manufactured goods).
CBAM’s principle is that the same CO2 price applies to imported and EU-manufactured products. The problem is that EU ETS 1 has made the production of high emission goods in Germany and the EU more expensive. If industrial raw materials and goods from non-EU countries are now also subject to a CO2 price in the EU, this protects against competitive disadvantages and ‘carbon leakage’. The prior practice of granting industrial companies a free allocation of emission allowances to guard against direct carbon leakage through the EU ETS is then no longer necessary. This allows the CO2 price in the EU to operate with greater effectiveness. In addition, carbon price for imports also creates financial incentives for companies in third countries to protect the climate. CBAM therefore combines carbon leakage protection and effective CO2 pricing. The EU's aim is to promote effective methods of decarbonisation worldwide.
Information by the German Envoronment Agency
EU Commission proposes comprehensive reform of emissions trading
Timeline
The EU CBAM Regulation (2023/956) came into force in May 2023 initiating a two-year transition phase that started on 01/10/2023. During this period, participating companies, i.e. importers of industrial raw materials and goods, must submit quarterly reports detailing the embedded carbon emissions associated with these products. No financial obligations arise during the transition phase.
The CBAM definitive regime began on 01/01/2026. Importers of CBAM goods must be authorised as CBAM declarants and submit annual CBAM declarations on the embedded grey emissions in the imported goods. In addition, CBAM certificates must be acquired and submitted annually for the emissions embodied in the imported goods.
CBAM will be gradually expanded from 2026 to 2034. At the same time, free allocation in the EU ETS 1 will be phased out for the sectors concerned.
You can find an overview of the reporting and submission requirements, as well as information to help you determine whether you are subject to the CBAM obligations, on our website.
CBAM in 60 seconds
Explanatory film by the European Commission
Explanatory film of the Directorate-General for Taxation and Customs Union (DG TAXUD) ‘Carbon Border Adjustment Mechanism in 60 seconds’: Because the EU is increasing its climate targets while non-EU countries have less stringent environmental and climate policies, there is a high risk of so-called ‘carbon leakage’ emissions, which can shift emissions outside Europe and undermine EU and global climate efforts. This is why the EU needs the Carbon Border Adjustment Mechanism (CBAM) for the import of goods from third countries: a system that sets a fair price for the carbon emitted during production and promotes clean industry in third countries.
Roles and responsibilities of the various stakeholders in the CBAM
The following table provides a compact overview of the various stakeholders involved in the CBAM.
| Stakeholder | Responsibilities |
|---|---|
| Importers of CBAM goods or indirect customs agents |
|
| European Commission |
|
| National customs authorities (in Germany, the General Customs Directorate (GZD)) |
|
| National competent authorities (in Germany, the DEHSt) |
|
| Installation operators in third countries |
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| Accredited verification bodies (verifiers) |
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| National accreditation bodies (in Germany, DAkkS) |
|
Example of a CBAM process
A simplified overview of CBAM processes during the definitive regime, using ammonia as an example
The diagram illustrates how the CBAM works using a schematic example: A German-based importer brings ammonia (CN code 2814 1000) from a facility in a third country into the European Union. Although the goods are imported into the European Union via the Port of Rotterdam and are registered by Dutch customs, the importer is based in Germany and has been approved for the CBAM by the DEHSt via the CBAM registry, and is monitored by the DEHSt for compliance with CBAM obligations.
In their CBAM declaration, which is submitted via the CBAM registry, the importer reports the amount of ammonia brought in as well as the resulting direct and embedded emissions. When determining the embedded emissions in their CBAM declaration, they have the option of using either standard values or, as in the example above, actual values verified by an verification body.
The ammonia manufacturer can enter data their facility data in the CBAM registry via the portal for third-country operators (O3CI portal) and upload the emissions report for the goods produced at their facility. The O3CI portal can also be used to confirm the verification body’s emissions verification. The authorised CBAM declarant can then access this data directly for their CBAM declaration, provided the facility operator permits this. Facility operators from third countries decide for themselves whether to register on the O3CI portal and who they wish to share their data with. If the installation operator is not registered on the portal, proof of emissions calculation and verification must be sent to the authorised CBAM declarant via an alternative communication channel and uploaded by the latter to the CBAM registry.
The authorised CBAM declarant purchases CBAM certificates via the sales platform linked to the CBAM registry, in an amount corresponding to the embedded emissions contained in the CBAM products imported during the reporting year. These are held in their CBAM account when they submit the CBAM declaration. The European Commission then cancels this number of certificates from the authorised CBAM declarant’s CBAM account.
Through a separate access point to the registry, the DEHSt can view the importer’s CBAM declaration and the number of CBAM certificates purchased and surrendered. This allows it to verify compliance with the holding and surrender obligations, as well as the credibility of the information. The DEHSt receives the customs data that was registered when the ammonia was imported from the European Commission. This data is cross-checked with further information contained in the CBAM declaration.
