The CBAM: A new european regulatory instrument 

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In 2005, Europe established the world's largest carbon market to control and limit the amount of greenhouse gases emitted: the Emission Trading System (ETS).

Today, the EU is working on a new mechanism to complement the ETS: the Carbon Border Adjustment Mechanism (CBAM).

The Carbon Border Adjustment Mechanism (CBAM) is a regulatory instrument designed to impose a carbon pricing on imported goods entering the customs territory of the European Union (including Iceland, Liechtenstein, and Norway), equivalent to the carbon cost faced by European manufacturers producing these goods.

The imported products affected are those originating from countries that do not have environmental standards comparable to those of the European Union regarding carbon emissions reduction.

The CBAM is part of the “Fit for 55” package proposed under the European Green Deal, regulated by the European Climate Law. The goal of the Green Deal is to make Europe the first climate-neutral continent by 2050, with an intermediate target of reducing GHG emissions by 55% by 2030 compared to 1990 levels.

The objectives of the CBAM.

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The CBAM aims to address carbon leakage. It also seeks to safeguard industrial sovereignty and maintain economic activity in the face of competition.

"Carbon leakage" refers to the phenomenon where industries and businesses relocate their activities to countries with less stringent environmental regulations to avoid the costs associated with reducing carbon emissions. This leads to exported pollution (through outsourcing) that is then re-imported into European territory.

The existence of carbon leakage highlights unequal treatment between European and non-European producers (higher production costs, additional expenses, etc.), which exacerbates issues of outsourcing and deindustrialisation.

The CBAM aims to restore fair competition and encourage businesses to manufacture in Europe.

The initial products covered by the CBAM.

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The operation of the CBAM.

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The charges outlined by the CBAM will use the EU Emissions Trading System (ETS) as a reference, with the rate expressed in € per tonne of CO2 being determined on a weekly basis.

Importers of products from third countries will be required to purchase certificates from national authorities. certificats MACF, dont le prix sera basé sur celui du CO2 au sein du marché européen du carbone.

Each year, before 31 May, importers will be required to declare the imported products from the past 12 months, specifying the quantities imported, the details of the production sites, the production processes, the associated direct and indirect emissions, and provide evidence of the purchase of the corresponding MACF certificates.

The number of quotas purchased must correspond to the carbon footprint that the same product would have if manufactured within the EU. In the event of a quota exceedance, importers will be required to pay a surcharge, the amount of which is determined by the market and the law of supply and demand.

The implementation of the CBAM will be carried out gradually:

Methodologies and Calculations for the CBAM

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During the transition phase, the reporting methodology is flexible. European companies can declare their imports using various calculation methods:

• the method recommended by the Commission ("EU method")
• an equivalent method
• based on default values

This aims to give companies time to prepare in a predictable manner. It should be noted that from 1 January 2025, only the EU method will be accepted.

The company importing a product subject to the CBAM will need to request information regarding the carbon content of the product from its non-EU supplier.

The calculation can be performed internally by the company or by an external service provider, such as a consultancy firm or certified verifiers.

The Carbon Border Adjustment Mechanism represents a major milestone in the EU's decarbonisation strategy towards achieving carbon neutrality by 2050.

This environmental policy measure will hold companies accountable for their carbon emissions, also engaging stakeholders outside the European Union

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