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On May 17, 2022, the European Parliament (EP) approved the amendments of Carbon Border Adjustment Mechanism (CBAM)[1] presented by the Committee on the Environment, Public Health and Food Safety (ENVI), which will come into force on January 1, 2023.
In order to achieve EU's ambitious targets of reducing 55% greenhouse gas (GHG) emissions compared to 1990 by 2030, and becoming climate-neutral by 2050, the European Commission adopted the proposal[2] for establishing a carbon border adjustment mechanism on July 14, 2021. It introduced a carbon levy on imports of highly-polluting goods like steel, cement and fertilizers. On March 15, 2022, the EU's 27 economy ministers reached an agreement[3] on the general approach of CBAM. Recently, the revision on CBAM recommended by ENVI was passed. The major amendments are summarized in the table below.
Table 1: Amendments of CBAM
Item | July 2021 Proposal | May 2022 Amendments |
Scope of Products Subject to Carbon Levy | Iron and steel, aluminium, refineries, cement, and fertilizers. | Adding organic chemicals, hydrogen, and polymers. |
Scope of Emissions | Direct emissions (Annex I) | Adding indirect emissions (Annex II) |
Transitional Period | Until December 31, 2025 | Until December 31, 2024 |
Free Allowance | By 2035 | By 2030 |
Executive Body | 27 CBAM authorities in each EU Member State | A single EU CBAM authority |
The CBAM is gradually taking shape and will have a tangible impact on the effort toward reducing GHG emissions. Enterprises in the global value chain are suggested to evaluate potential CBAM impact and costs, review carbon budget in overall life cycle, and speed up green transformation.
