EU Unveils Carbon Border Adjustment Mechanism on Steel Imports
The European Commission, as part of its 'Fit for 55' climate package, has adopted a Carbon Border Adjustment Mechanism. The CBAM will apply to imports into the EU of iron and steel, aluminium, cement, fertilizers and electricity. During a transition period from 2023 to 2025, importers will have to report the emissions embodied in the goods brought to the EU without paying any duties. Definitive measures will come into force in 2026, and importers will then have to declare annually the quantity of goods and the amount of embedded emissions in the total goods they imported into the EU in the preceding year, and surrender the corresponding amount of CBAM certificates.
CBAM will apply to direct emissions but, by the end of the transition period, the EC will evaluate whether an extension of the measures is needed, possibly including indirect emissions.
However, CBAM should not apply to certain products including ferrous scrap, ferroalloys and certain fertilizers whose production does not entail meaningful emissions
EU importers of goods can also buy CBAM certificates. The price of the certificates will be calculated depending on the weekly average auction price of EU ETS allowances expressed in Euro per tonne of CO2 emitted, in the week prior to purchase. The number of CBAM certificates that are required to be purchased will be adjusted to reflect the number of EU ETS allowances that are allocated free of charge to Europe-based producers.
European steel and aluminum producers' associations expressed concerns indicating that they considered the CBAM proposals incomplete as the package limits itself to covering products' direct or embedded emissions, not including indirect emissions, and does not give clarity on which emission scopes will finally be included.