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The European Parliament and the Council reached a provisional agreement on 13 December on a Carbon Border Adjustment Mechanism, extending the scope of the European Commission’s original proposal to hydrogen, indirect emissions and some downstream products.

The mechanism, to apply from 1st October, 2023, will oblige companies that import into the EU to buy so-called CBAM certificates to account for the difference between the carbon price paid in the country of production and the price of carbon allowances in the EU Emissions Trading System.   “CBAM will cover iron and steel, cement, aluminium, fertilizers and electricity, as proposed by the Commission, and extended to hydrogen, indirect emissions under certain conditions, certain precursors as well as to some downstream products such as screws and bolts and similar articles of iron or steel,” the EP said. Crucially, a CBAM transition period from 1st October 2023, will see obligations on importers limited to reporting until 2026.

During the negotiations on the reform of the EU ETS over the weekend, the Council and Parliament agreed to end free allowances for the CBAM sectors, over a nine-year period between 2026 and 2034. During this time, the CBAM will apply only to the proportion of emissions that does not benefit from free allowances under the EU ETS, in order to fully respect the World Trade Organisation's rules and to avoid double protection of EU industries.

CLECAT regrets that the final agreement includes the Council's position on article 5 which imposes an obligation on the indirect customs representative to submit the application to be the authorised CBAM declarant on behalf of the importer when the latter is not established in a EU Member State. CLECAT has been vocal on this in the last couple of months warning for the administrative burden and liability risks that this could imply for freight forwarders and customs.