EU adopts the Carbon Border Adjustment Mechanism Regulation

EU adopts the Carbon Border Adjustment Mechanism Regulation

Client Alert

mondaq-award-thought-leader-autumn-2023On May 16, the Regulation establishing an EU Carbon Adjustment Mechanism (CBAM) was published in the Official Journal of the EU and entered into force the following day. Under the CBAM, importers into the EU of carbon-intensive goods (mainly cement, electricity, fertilizers, iron and steel, aluminum, and hydrogen) will be required to pay a charge for the carbon emissions embedded in those products. This charge will be gradually phased in from 2026 to 2034, and eventually will equal the charge that would have been paid by an EU producer under the EU Emissions Trading System (EU ETS). The CBAM also imposes detailed reporting requirements. The transitional period provided in the CBAM will apply as of October 1, 2023, with importers being subject only to reporting requirements until December 31, 2025.

The CBAM, which is the first instrument of its kind in the world, is expected to significantly increase red tape and add costs for importers of carbon-intensive products into the EU. These companies will soon face important reporting obligations and, at a future stage, carbon charges.

At the same time, the CBAM will also impact a) foreign producers of these goods, which may have to share in the added charges with their importers, and b) EU companies, which will have to pay higher prices for the imported goods in question, as well as for any derivative products. Businesses should therefore pay close attention to these developments and start reviewing their supply chains in preparation for the full application of this new legislation.

Read the full alert.



Unless you are an existing client, before communicating with WilmerHale by e-mail (or otherwise), please read the Disclaimer referenced by this link.(The Disclaimer is also accessible from the opening of this website). As noted therein, until you have received from us a written statement that we represent you in a particular manner (an "engagement letter") you should not send to us any confidential information about any such matter. After we have undertaken representation of you concerning a matter, you will be our client, and we may thereafter exchange confidential information freely.

Thank you for your interest in WilmerHale.