CARBON BORDER ADJUSTMENT MECHANISM (CBAM) - FAQs
Frequently Asked Questions
Who does CBAM affect?
CBAM will come into effect for imports of specific commodities—iron, steel, aluminium, cement, electricity, fertilizers, and hydrogen—from sources outside the European Union (EU) beginning October 1st, 2023. These sectors selected for CBAM are identified as having a significant risk of carbon leakage and high emission intensity, collectively constituting more than half of the emissions in covered ETS sectors. There’s potential for CBAM to broaden its scope to include additional ETS sectors in the future.
Starting in 2026, EU importers dealing with covered goods must register with national authorities and acquire certificates, priced in alignment with EU ETS allowances. Importers are required to declare and offset emissions annually, with allowances provided for previously paid carbon costs during production.
Understanding EU ETS:
The European Emissions Trading System (EU ETS) is stands as the pioneering and largest carbon emissions trading initiative globally, representing a cornerstone of the European Union’s strategy to combat climate change and reduce greenhouse gas emissions.
CBAM Regulations in Ireland:
Businesses involved in imports must obtain authorization as an “authorized declarant,” disclosing annual quantities and embedded emissions of CBAM goods, and furnish CBAM certificates to neutralize the revealed emissions.
Deciphering Carbon Credits:
Carbon credits symbolize measurable and verifiable reductions in emissions achieved through certified climate action endeavors. These initiatives aim to reduce, prevent, or eradicate greenhouse gas (GHG) emissions.
Understanding Carbon Credit Mechanics:
Entities contributing to pollution receive credits enabling them to keep emissions within a specified threshold, which diminishes gradually over time. Concurrently, entities with surplus credits have the option to sell them to other entities in need. This setup incentivizes companies to minimize greenhouse gas emissions: firstly, by incurring expenses to procure additional credits if emissions exceed the limit, and secondly, by potentially earning revenue through emission reduction activities and surplus credit sales.
Importer Responsibilities:
Importers of CBAM goods are obligated to register in the transitional registry and prepare to submit quarterly reports detailing imports commencing January 2024.
The Phase-In Period of CBAM:
CBAM introduces a transitional phase from October 1st, 2023, to December 31st, 2025. This interim period aims to gather crucial data to refine CBAM’s structure for its permanent implementation starting January 1st, 2026. Throughout this transition, importers are solely required to meet reporting obligations, without facing any financial adjustments.
