CO2 duty: only short time to go

  • 09/01/2023
  • Reading time 5 Minutes

The Baker Tilly CBAM check helps to implement the CBAM requirements in good time. 

Although it is only four weeks until the CBAM Regulation (carbon border adjustment mechanism) will come into effect on October 1, 2023, many businesses seem to be insufficiently prepared for the new reporting requirements. Importers and, to some extent, also indirect customs representatives will be required to calculate and document data on direct and indirect emissions of the imported CBAM goods. This is even more aggravated by the fact that those required to file the reports depend significantly on the information provided by plant operators who need comprehensive technological solutions for determination and calculation. This is what companies can do (right now) in order to comply with CBAM requirements and avoid looming penalties of 10 to 50 euros per unreported ton of emissions.

Initially, the Regulation applies to listed emission-intensive imported goods (CBAM goods) from the iron and steel (including downstream products such as screws), cement, aluminum, fertilizer, electricity and hydrogen products sectors. 

On May 10, 2023, the European Parliament and the Council adopted Regulation (EU) 2023/956 in order to create a carbon border adjustment mechanism (CBAM Regulation). Such regulation significantly expands the EU emissions trading system. 

The carbon border adjustment mechanism (“CBAM”) established in the Regulation pursues no lesser goal than to prevent a relocation of industrial sectors and to ensure fair competition on the EU market. Such mechanism has become necessary due to the risk of “carbon leakage”, i.e., a relocation of greenhouse gas emissions: While the EU is pursuing ambitioned greenhouse gas reduction targets with its “Fit For 55” climate protection package, other countries are not placing as much importance on the topic. Among other things, the already existing EU Emissions Trading System imposes additional costs on companies from EU member states as well as Norway, Iceland and Liechtenstein to encourage decarbonization of the economy. EU emission allowances, some of which are currently still allocated free of charge, will be abolished in the future. However, diametrically opposed to the goals, there is a threat of relocating production facilities to countries with lower emission reduction requirements or increasing imports of environmentally unfriendly manufactured products. This gap is to be closed by the CBAM Regulation.

CO2 reporting obligation already applicable from October 2023

The obligations resulting from the Regulation will start with a reporting obligation from October 1, 2023. Further details of the obligation will be set out in an implementing regulation.

Extensive reporting requirements

Within the scope of this extensive obligation, importers and, in some cases, indirect customs representatives, must calculate and document, among other things, data on direct and indirect emissions of the imported CBAM goods. This complex calculation takes place in several stages:

  1. Determination of a production facility’s emissions
  2. The facility’s total emissions are attributed to CBAM goods production processes. Special features of the specific production process must be taken into account
  3. Addition of emissions from preliminary products, if applicable
  4. Calculation of CBAM goods emissions per ton/ MWh

Reporting parties are significantly dependent on the information provided by the plant operators. In addition, comprehensive technological solutions for determination and calculation are required. Published comprehensive guidelines for plant operators and importers illustrate the complexity. The Implementing Regulation does (initially) create procedural simplifications for the calculation. For example, in the event that not all the information required for the calculation is available, reference values published on the Commission’s CBAM website can be used until July 31, 2024. However, a high emission intensity is assumed for these reference values in each case.

In addition, the report must also list the CO2 price already paid in the country of manufacture. The first report must be submitted by the end of January 2024.
There is no exemption from the reporting obligation for small and medium-sized enterprises; however, there is a value limit of EUR150 for each consignment of goods. 

What are the consequences of violations of the CO2 duty?
Even in the transitional period, the Regulation provides for fines of EUR 10 to 50 per non-reported ton of emission. This should be taken as an opportunity in order to promptly identify affected products and supply chains. Furthermore, one should make contractual arrangements on responsibilities and information obligations along the supply chain, if necessary, up to the plant operators. Only they can provide the required and, to some extent, very detailed data. Finally, companies should implement appropriate responsibilities for compliance with and monitoring of the reporting obligations.

Registration obligation and emissions trading from 2026

From January 1, 2026, the CBAM Regulation will apply in full and will significantly affect customs clearance. From such date, only authorized CBAM declarants will be able to act as customs declarants for CBAM goods. Without authorization, an import of the affected goods will not be possible. In addition, the CBAM declarant is subject to reporting obligations. The mandatory allowance trading for the emissions contained in the products will also start from such date. 
Overall, the CBAM Regulation creates a complex mechanism requiring an adjustment and extension of customs procedures. In contrast, companies have only a short period of time from the Regulation’s enactment to the first obligation and extensive gathering of information.

How can Baker Tilly support you in implementing the CBAM requirements in a legally compliant manner?

  • CBAM check: 
    • Check of the product portfolio for CBAM relevant products
    • Evaluation of procurement channels and the products’ origin
    • Evaluation of contractual arrangements with suppliers in connection with CBAM requirements and information
  • Development of a CBAM action plan taking into account the products, supply structures and business areas
  • Support in implementing the monitoring and reporting systems
  • Creating contract wording and purchasing processes to meet CBAM information procurement obligations.
  • Review of existing internal compliance requirements or preparations in connection with procedures, responsibilities and processes for the transition period as well as the introductory phase from 2026
  • Support in connection with other individual questions and challenges.
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Authors of this article

Sebastian Billig


Attorney-at-Law (Rechtsanwalt)

Sven Pohl


Attorney-at-Law (Rechtsanwalt)

Mareike Höcker


Attorney-at-Law (Rechtsanwältin)

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