The latest updates on CBAM – The EU announced provisional methodology to calculate embedded GHG emissions in the CBAM goods

On 10 May 2023, the CBAM Regulation was adopted and officially entered into force on 17 May 2023. Accordingly, CBAM will start its 3-year transitional phase on 1 October 2023. After the transitional phase, CBAM’s permanent system will enter into force on 1 January 2026 and fully operates in 2034

The European Commission has published the draft Implementing Regulation for CBAM with detailed provisions on reporting obligations and information on CBAM-covered goods required from the EU importers, as well as the provisional methodology to calculate embedded GHG emissions in the CBAM goods production process.

During the transitional phase from 1 October 2023 to 31 December 2025, the importers are required to report the emissions embedded in the imports subject to CBAM Regulation quarterly every year without paying any CBAM-related fees. Although importers are obliged to collect fourth-quarter data as of 1 October 2023, they only have to submit the first report before the end of January 2024 at the latest.

The draft Implementing Regulation also provides some flexibility in the reporting and calculation methodology of the embedded emissions during this period. According to the draft Implementing Regulation, enterprises will have three choices for reporting methods: (a) full reporting according to the new methodology (EU method); (b) reporting based on equivalent third-country national systems; and (c) reporting based on reference values. As of 1 January 2025, only the EU method will be accepted.