By 1 March 2024, as part of the Carbon Border Adjustment Mechanism, importers of cement, iron and steel, aluminium, fertilisers and hydrogen must report to the European Commission the embedded carbon emissions relating to goods imported into the EU between October and December 2023.
What is the Carbon Border Adjustment Mechanism?
The Carbon Border Adjustment Mechanism is an environmental policy of the EU designed, in the context of the global carbon tax initiative, to support the EU climate ambitions of reaching climate neutrality and addressing the risk of carbon leakage.
The mechanism is being introduced in two phases.
In the Transitional Phase (from 1 October 2023 to 31 December 2025), importers have to quarterly report a set of data, including carbon emissions embedded in the goods they import into the EU.
In the Definitive Phase (starting from 1 January 2026), importers will pay the CO2 price for their emissions and will have to surrender relevant certificates relating to such emissions.
The Transitional Phase imposes certain reporting obligations on importers of the goods listed above into the EU. However, it is crucial to assess which entity has to comply with these obligations, whether these obligations can be delegated to a third party, and whether they impact other obligations of such entity, for instance in the context of the EU REACH Regulation.
Regarding the reporting in the Transitional Phase:
In case of EU established importers: These importers are responsible to submit the reports themselves, although they can delegate these obligations to a third party (called an indirect customs representative), which can file the reports on their behalf.
In case of non-EU established importers: These importers have to appoint a third party (an indirect customs representative), to file the reports on their behalf.
Broadly speaking, the reports should contain:
The total quantity of goods listed above imported into the EU during the relevant period.
Data on direct and indirect total embedded emissions of these goods.
Where applicable, the carbon price due in a country of origin for the embedded emissions.
During the Transitional Phase, the importers may use default values published by the European Commission to determine the embedded emissions. The European Commission have published sample report excel sheet for download, available here.
The reports are to be submitted on a quarterly basis, noting that the first report for the goods imported into the EU between October and December 2023 must be completed by 1 March 2024 (the initial deadline of 31 January 2024 was extended due to technical issues with the Transitional Registry). . The two first reports can however be modified or corrected until 31 July 2024 (the submission deadline for the third report).
The reports should be uploaded onto the Transitional Registry (access to which is given by the national customs authorities).
How can McDermott assist you?
The Trade & Regulatory Team of McDermott Will & Emery, led by Raminta Dereskeviciute, is here to help you in assessing your new obligations under the Carbon Border Adjustment Mechanism and preparing you for its Definitive Phase. Please do not hesitate to reach out.