European Union Carbon Border Adjustment Mechanism (CBAM)
To reduce carbon emissions caused by the effects of climate change, the European Green Deal and the European Union Carbon Border Adjustment Mechanism (CBAM) have been introduced.
This regulation came into effect on October 1, 2023. The transition period will continue until January 2026, during which time greenhouse gas emissions associated with products covered by CBAM must be reported by EU importers.
In the initial phase, the process will begin with exports to the EU in the aluminum, iron-steel, fertilizer, cement, hydrogen, and electricity sectors, and will later expand to include other sectors. These sectors were selected based on specific criteria such as high carbon leakage risk and high emission intensity. Once fully implemented, they will represent more than 50% of the emissions from industrial sectors covered by the Emissions Trading System (ETS). In the future, CBAM will be extended to other ETS sectors.
The six designated sectors are required to submit reports every three months under the relevant regulation until January 2026. For example, for imports made during the January–March period, the CBAM report must be submitted by the end of April.
Before products are exported to the European Union, the EU-based importer must be authorized by the relevant institutions. After the importer declares the goods to customs authorities, the CN code of the product is checked. If the product falls under CBAM and the importer is not authorized, the import will not be permitted.
The customs authority in the EU member state will notify the competent CBAM authority of the product type and quantity, including the identity number of the declaring importer. The authorized importer must submit carbon emission declarations to institutions designated in the member states.
To calculate the carbon fee payable under CBAM, the embedded emissions in the imported products must be known. If the importer cannot obtain this information from the exporting company, the default values determined by the European Commission must be used. Manufacturers in third countries may choose to declare their own emission values to maintain strong trade relations with the EU. In such cases, the reports must be prepared and verified according to international standards.
Are You Ready for Climate Legislation, the Emissions Trading System, and Compliance with the Carbon Border Adjustment Mechanism?
The Medium-Term Program (MTP), which serves as a roadmap to increase predictability for both public and private sectors, was published in the Official Gazette dated September 6, 2023, numbered 32301.
The program states that in the first quarter of 2024, planning and implementation tools (laws, decisions, administrative regulations) related to climate change mitigation and adaptation activities will be developed to support the green transformation and achieve the 2053 net zero emissions target.
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