From October 1, 2023 until December 31, 2025 entrepreneurs will be required to report carbon dioxide (CO2) emissions associated with production of imported products. On August 17, 2023, the European Commission adopted the implementing rules for these transitional obligations, known as CBAM.
The CBAM mechanism is a part of "FIT for 55 package” which aims to address the issue of greenhouse gas emissions being transferred outside the EU by imposing additional charges on imported products based on their carbon footprint.
CBAM regulations will particularly affect the following product groups:
- Steel, iron,
- Aluminum,
- Fertilizers,
- Ammonia,
- Cement,
- Electricity,
- Hydrogen.
Reporting obligations will apply to:
I. Data for goods listed in Annex 1 (including cement, electricity, iron and steel, aluminum, chemicals):
- Quantity of imported goods,
- CN code of the imported goods.
II. Information regarding the embedded emissions of goods listed in Annex 1, such as:
- Country of origin of the imported goods,
- Place of production of the goods determined based on the following data: a) Appropriate UN/LOCODE location code applicable in trade and transport, b) Name of the company providing the installation, installation address, and its transcription in English, c) Geographic coordinates of the main source of emissions from the installation,
- Production pathways (according to Annex 3) reflecting the technology used for the production of goods, and information about specific parameters qualifying the chosen production pathway,
- Specific direct embedded emissions associated with the goods,
- Reporting requirements affecting embedded emissions,
- In the case of electricity: a) Emission factor applied to electricity, expressed in tons of CO2 equivalent per MWh (megawatt-hour), b) Source of data or method used to determine the emission factor for electricity,
- For steel products – the identification number of the specific steel mill where a batch of raw materials was produced, if known.
III. Information about indirect embedded emissions, including:
- Electricity consumption in the production process per ton of produced goods (in megawatt-hours),
- Whether reporting is based on actual values or default values published by the European Commission,
- Indication of the appropriate emission factor for consumed electricity,
- The quantity of specific indirect embedded emissions.
Failure to comply with the above reporting obligations or incorrect reporting may result in financial penalties ranging from 10 to 50 EUR per tonne of unreported emissions.
The implementing regulation will enter into force the day after its publication in the Official Journal of the European Union.
Data collection will commence on October 1, 2023, whereby the first report must be submitted by importers by January 31, 2024.
If you are interested in this topic and the potential implications that the CBAM system may have on your business, we encourage you to contact Jarosław Szajkowski, Senior Manager at ASB TAX.
