What does it mean for businesses and what next?
The reporting obligations under the European Union’s Carbon Border Adjustment Mechanism (EU CBAM) came into force on 1 October 2023.
These measures will have significant implications for international trade into the EU. EU importers are now required to report on the greenhouse gas emissions embedded into certain of their imports, and face penalties if they fail to do so accurately. And, from 1 January 2026, EU importers will also be required to pay tariffs on those embedded emissions.
Sectors particularly impacted include iron, steel, cement, fertilisers (including ammonia), aluminium, electricity, and hydrogen – but the scope of coverage may expand further.
Affected businesses need to begin preparing for EU CBAM compliance. Companies who export goods covered by the EU CBAM into the EU would be well advised to familiarise themselves with its requirements, in order to prepare for providing the necessary data to their EU customers, and to consider how best to optimise their operations in order to remain competitive.
In this publication we:
- explain the background to the EU CBAM;
- discuss its current and future coverage;
- summarise the key takeaways for businesses;
- consider the geopolitical implications of the EU CBAM, in particular for exporters in less developed jurisdictions around the world; and
- highlight the CBAM proposals which the UK government is considering in parallel for the United Kingdom.