CBAM – Carbon Border Adjustment Mechanism

What is CBAM?

The Carbon Border Mechanism, or CBAM, requires that businesses based in the EU that import iron, steel, fertilisers, electricity, aluminium, cement, and hydrogen report and offset the carbon dioxide emissions associated with such imports from outside the EU.

According to current information, CBAM's reporting obligations will begin in October 2023, when the transition period begins. The compensation of emissions, which requires the purchase of so-called CBAM certificates, will start later (the date is still open).

For businesses, CBAM leads to two types of costs:

CBAM certificates, the price of which is based on the EU emissions trading system (ETS).
The collection and reporting of emissions-related data.

The transition period to CBAM

For each product type and supplier listed in the CBAM product range, importers must submit quarterly reports detailing both direct and indirect emissions during the transition period.

The transition period does not yet incur expenses associated with the purchase of certificates since reporting does not yet require CBAM certificates. However, reporting is mandatory despite this.

It should be underlined that the implementation of reporting procedures during the reporting phase makes it possible to anticipate future costs associated with emissions in contracts, resale pricing, and supplier selection.

Identification of products included in CBAM's product range

Based on the company's historical data, we can analyse whether the company's products fall under CBAM product scope. The analysis requires that the commodity codes of the goods imported have been correctly determined. Our services also include assistance with product classification and process development so that the company can classify its own products in the future.

Data collection for CBAM reporting

CBAM reporting requires companies to collect emission data from suppliers and goods manufacturers. Because of this, the companies' contract clauses might require modifications that ensures that suppliers and manufacturers provide the necessary information to the buyer for reporting.

Through our local offices outside of the EU, we can facilitate data collection and help with contract clause adjustments. We have developed a reporting solution to support companies, the Trade Data Hub, which automates data gathering and helps manufacturers and suppliers by providing the required information on time.

Trade Data Hub - our CBAM reporting tool

With our Trade Data Hub reporting tool, your company can reduce CBAM-related costs by automating emissions-related data collection and CBAM reporting. As an additional service, the Trade Data Hub tool can be connected to the company's ERP system, which allows for real time monitoring of the company's imports and costs related to the supply chains.

With the tool's add-on, your company can determine the flows and actors whose costs need to be factored into your supply chains as well as future expenses associated with emissions. Additionally, your business can analyse its CBAM costs associated with supply chains in greater depth with our Global Rate Finder tool, which supports your company in making the potential changes in the supply chain.

The full implementation of CBAM

When CBAM is fully implemented, CBAM's product coverage is expected to expand.

When CBAM fully enters into force, importers must compensate for the emissions related to the production of imported goods covered by CBAM, this is done by purchasing and handing over CBAM certificates.

We will develop our Trade Data Hub tool to make it easier for companies to evaluate how many certificates are needed, their purchasing, emission reports and the handover of certificates.

Why should you choose PwC as your partner for CBAM obligations?

Our strength is cooperation between different teams. Our customs and tax technology teams support you in the automation of the CBAM obligations. In addition, if necessary, we offer legal services for drafting contractual obligations and logistics experts that can assist with eventual changes in your supply chains. Furthermore, we collaborate closely with our regional offices from around the world, which enables quick and effortless support in the collection of information from suppliers if necessary.