EU Adopts The Carbon Border Adjustment Mechanism Regulation

On 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.