On December 14, 2022, the Council of the European Union approved the latest version of the Regulation establishing the Carbon Border Adjustment Mechanism (CBAM).
This is not yet the final version of the regulations and they are subject to change. However, information obtained from representatives of the EU authorities responsible for the project shows that the legislative process should last no longer than the end of March 2023, and the mechanism itself is to come into force on October 1, 2023 (in a transitional form, which will be in force until end of 2025). For obliged entities, this date is very important, as it is associated with the introduction of new obligations regarding the submission of quarterly reports on imported products and incorporated emissions.
The latest version of the Regulation establishing CBAM
The current version of the Regulation introduced changes compared to its previous version, which concern, among others:
1) Extension of the catalog of products covered by CBAM to include:
- kaolin and other kaolin clays, calcined,
- alumina cement,
- agglomerated ores and iron concentrates
- screws, bolts, nuts, coach screws, screw hooks, rivets, cotter pins, cotter pins, washers (including spring washers) and similar articles of iron or steel,
- other articles of iron or steel,
- structures of aluminum and parts of such stuctures,
- tanks, cisterns, vats and similar aluminum containers,
- Stranded wire, cables, braided bands
- other aluminum articles and
2) the calculation of indirect emissions in the quantity of CBAM certificates purchased. This change means that importers will be obliged to purchase CBAM certificates in an amount that includes both direct and indirect emissions embedded in products (indirect emissions under the current version of the regulation are defined as emissions related to the production of electricity that is consumed in the production of goods, regardless of where the electricity consumed is produced).
3) exclusion from the scope of CBAM:
- imported goods the intrinsic value of which does not exceed, for each consignment, the amount of EUR 150
- goods transported in the personal luggage of travellers from third countries, provided their intrinsic value does not exceed EUR 150
- goods transported or used in connection with military activities
4) imposing on the importer (or intermediary, if the entity uses its services) the obligation to apply for authorized declarant status these provisions will enter into force on 31 December 2024) Importantly, such an application should be submitted before importing products covered by the CBAM mechanism.
5) Defining an open catalogue of activities that may be deemed to circumvent the CBAM regulations. Such circumvention will be considered to include:
- slight modifications of products in order to change their classification within CN codes
- the artificial splitting of supplies into consignments below a certain value threshold.
In the intention of EU legislators, CBAM is to cover a wide range of products with extending the scope of the mechanism to other products at risk of carbon leakage, including organic chemicals and polymers (which, according to the current version of the regulation, should be reviewed by the European Commission in 2026).