What is CBAM?
Together with other sustainability initiatives (such as the Corporate Sustainability Reporting Directive guidelines), EU’s Carbon Border Adjustment Mechanism (CBAM) is a key element in EU’s global focus on sustainability regulation.
Certain industries will face significant challenges due to CBAM.
What are the costs?
In principle, CBAM will apply the same price per ton carbon for an imported “CBAM product” as applies under the EU ETS (Emission Trading System) today.
The price of CBAM certificates will be calculated as an average of the end prices for all auctions of carbon quota performed on auction platforms every week (currently, the price is approx. DKK 759 per certificate).
How does it work?
CBAM will be a duty based on the carbon emissions of certain products when they are imported into the EU. In general, the duty will be based on the actual emissions. If and when it is not possible to determine the actual emissions adequately, the emissions may also be determined by way of standard values (which are expectedly higher).
Under CBAM – and in line with the current emission trading system – a certificate per ton carbon emitted must be obtained (a “CBAM certificate”).
CBAM certificates will be non-tradeable.
Once CBAM becomes effective, it will involve a reporting obligation. The “CBAM declarant” is obliged to file a report on the emissions embedded in the imported goods. The CBAM declarant may be the same party as the “customs” importer or may act on behalf of the importer for CBAM purposes.
It should be expected that a considerable amount of the supply chain and environmental print data must be collected and shared with the CBAM declarant in order to fulfil the requirements under CBAM.
Who and which products are subject to CBAM?
CBAM applies to operators engaged in import of the following products into the EU:
Whether CBAM should be applied or not depends to a large extent on the Combined Nomenclature (CN) code which is applied then goods are imported into the EU. Corporations should therefore have a clear perception of their supply chain, environmental footprint, customs and trading processes in order to assess whether they will be affected by CBAM.
What are CBAM goods – CN/HS codes are the key!
- Aluminum*
- Iron and steel*
- Mineral products (cement)
- Electricity
- Fertilizer
- Hydrogen
*List of goods for which only direct emissions will be taken into account in relation to Article 7 of EU’s CBAM regulation.
CBAM will also apply to processed products from these goods due to the procedure on active processing when the products are imported into the EU.
N.B.: Many US corporations already have access to this level of customs and trade information.
When will CBAM become effective?
The CBAM reporting requirements took effect as of 1 October 2023. Purchases of CBAM certificates (and thus payments) apply as of 1 January 2026.
Who is responsible under CBAM?
The “authorized CBAM declarant” bears the legal responsibility for reporting and payment of CBAM. Reporting/filing of this information will, however, to a large extent depend on the CBAM declarant receiving exact (and controllable) information from the suppliers. CBAM will therefore have a broad impact on the entire supply chain (and not just corporations importing goods directly into the EU).
What are the requirements of the CBAM report?
The first CBAM report of a corporation must be filed in January 2024 (for the period starting as of 1 October 2023).
The CBAM report must e.g. contain the following information:
- Amount of CBAM products
- Product code
- Actual direct carbon emissions from the production
- Actual indirect carbon emissions from the production of electricity applied during
- manufacturing of the goods
- Information as to whether carbon duties, etc. have been paid in the country of origin.
For a detailed list of the requirements of the contents of the CBAM report, please see here.
Most of the information required in your CBAM reporting is not generally accessible for corporations. It is therefore important to begin updating your master data as soon as possible.
As of 2026, data reported in your CBAM declaration must be verified.
How can PwC assist?
PwC’s experts will guide you and help you understand the potential implications of CBAM.
We can assist you in relation to the following:
- Keep you updated on the latest developments and political trends;
- Consider your current customs and trade flows in order to assess the applicability of CBAM based on your current and future operations;
- Predict and estimate the potential financial impact of CBAM; and
- Based on our knowledge and insights on the broad green legislative environment we can advise you on the next steps and which measures your corporation may apply.
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