CBAM stands for "Carbon Border Adjustment Mechanism", namely the "Carbon Border Adjustment Mechanism", commonly known as the "Carbon Tariff". It is an environmental policy instrument proposed and implemented for the first time by the European Union. It aims to impose equivalent carbon costs on imported products as those borne by goods manufactured within the EU, and reduce the risk of "carbon leakage".
CBAM requires that high-carbon products imported into the European Union must pay for carbon emissions generated during production.
Important Reminder: If exporting enterprises fail to provide accurate low-emission data of products, their EU customers will face high carbon tariffs or fines, which will ultimately affect enterprises' orders in the EU and foreign trade profits.
EU CBAM entered the transitional period on 1 October 2023, which will end on 31 December 2025.
The formal taxation period will start on 1 January 2026. EU importers shall fulfil tax payment obligations for embedded carbon emissions of CBAM products. Relevant exporting enterprises need to cooperate with importers and provide CBAM product carbon emission data every year, i.e. submit CBAM reports verified and certified by third parties.
CBAM Development Timeline:
December 2019 | The European Union released the European Green Deal and proposed to set up CBAM |
June 2022 | The European Parliament adopted the CBAM proposal |
September 2020 | The European Commission announced that CBAM would be included in legislative proposals |
May 2023 | The CBAM Regulation was published in the Official Journal of the EU and formally enacted into EU law |
October 2023 (Transitional Period) | During the transitional period, importers only need to declare import volumes and carbon emissions of products without paying any fees. Within one month after the end of each quarter, importers shall submit quarterly reports (The first report shall be submitted no later than 31 January 2024). |
January 2026 (Implementation Phase) | Enterprises need to report annual carbon emission data of imported products and pay corresponding carbon emission fees. Free carbon emission allowances will be reduced year by year, in line with the phase-out pace of free allowances under EU-ETS. |
January 2035 (Formal Full Implementation Phase) | Enterprises need to report annual carbon emission data of imported products and pay full corresponding carbon emission fees.(Phase with 100% abolition of free allowances) |
CBAM Compliance Requirements for Exporting Enterprises:
Exporting enterprises are not direct obligated parties for EU CBAM declarations and do not need to purchase CBAM certificates (pay carbon tariffs). Nevertheless, exporting enterprises must cooperate with importers on CBAM data reporting requirements and submit CBAM product carbon emission reports verified by third-party institutions on schedule.
To meet EU CBAM data requirements, exporting enterprises shall complete the following core work starting from 2026:
CBAM Monitoring Plan Compliance Foundation | CBAM Report Including Precursor Data | CBAM Verification & Certification Third-party Institution | Domestic Carbon Price Payment Vouchers For Carbon Tariff Deduction |
Establish a monitoring plan in accordance with new CBAM rules, define installation boundaries, emission sources, accounting methodologies, etc., and coordinate upstream suppliers to provide measured data of precursor materials to ensure traceable and verifiable data. | The annual CBAM report shall not only calculate embedded carbon emissions of products in compliance with regulations, but also realize "full-chain traceability" of data (including precursor data), and be compiled based on official templates. | Whether a CBAM report requires verification depends on the calculation method. Verification is mandatory if actual measured values are adopted, while verification is not required for the EU default value method. After entering the taxation period, CBAM reports must be verified by EU-recognized third-party institutions. | Carbon costs already paid domestically during product production can be used for carbon tariff deduction by EU importers. Enterprises shall fully retain valid documents including domestic carbon quota transaction vouchers and green electricity procurement agreements, and obtain official recognition from the EU.
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