Policy & Compliance
As EU ETS free allowances are phased out between 2026 and 2034, the price of CBAM certificates should increase, providing the incentives for EU businesses to decarbonise their supply chain. Although CBAM will apply to six sectors initially, the intention is that all sectors covered by the EU ETS will be within scope of the CBAM by 2030. Customs representation – a warning for freight forwarders In the case of CBAM, Customs authorities will inform Customs declarants of their obligation to report information during the transitional period. BIFA has seen guidance stating that the Customs declarant will be the importer established in the EU. The issue for the EU forwarding/Customs agent is that increasingly complex question, what if there is no EU established importer to be responsible for reporting the CBAM information? BIFA has seen guidance which states that in those cases the Customs agent, as the indirect representative of the non- established importer, could be the party required to submit the emissions data. This would be a considerable additional responsibility and liability. We have to remind the reader that the emissions data that has to be filed will include all emissions incurred in the manufacture and transportation of the goods from origin, not just the relatively simple measurement for the journey from the UK to the EU. During the early stages this may not be too much of an issue due to the initial scope of the reporting requirement and the fact that the first industries required to report usually have EU-established entities to provide the relevant emissions data. However, when the scheme expands to more industries there is much greater scope for problems, particularly with e-commerce shipped on a DDP basis, where there is no EU established importer. The UK is considering similar legislation and BIFA has responded to the consultation stating that the Customs agent should not be the party to submit the carbon data. We have looked at the model for the Plastic Packaging Tax, arguing that it could be used as the basis for a UK CBAM.
How new EU carbon rules will affect UK businesses The EU’s Carbon Border Adjustment Mechanism aims to tackle carbon ‘leakage’. It has major implications for UK forwarders
T he European Union’s (EU) Carbon Border Adjustment Mechanism (CBAM) commenced its transitional phase on 1 October 2023, meaning that businesses exporting to the EU must prepare for the changes. CBAM is a policy developed by the EU to prevent ‘carbon leakage’, which shifts emissions outside of Europe and undermines EU and global climate efforts. Carbon leakage occurs when industries transfer polluting production to other countries with less stringent climate policies or when EU products are replaced by more carbon-intensive imports. The reason why carbon leakage may occur in the EU is that it has a carbon pricing system, the EU emissions trading scheme (ETS), which places a price on the emission of carbon in certain sectors. How does CBAM work? The CBAM places a price on carbon emissions of goods imported into the EU to bring the carbon price of those goods in line with goods manufactured within the EU and to ensure that importers pay the same carbon price as domestic producers under the EU ETS. Since the UK is no longer an EU member, this will impact UK shippers to the EU who will be required to provide carbon- related data to their EU-based customers. The CBAM applies initially to imports into the EU of goods whose production is carbon intensive and
at risk of carbon leakage. These in- scope goods include: • Cement
• Iron & Steel • Aluminium
• Fertilisers • Hydrogen • Electricity. Key milestones
During the transitional phase, EU importers of goods within scope of the CBAM will have to report greenhouse gas emissions embedded in their imports. However, no financial payment will be necessary. During the first year of implementation (2024), companies will be able to report emissions in one of three ways: • Full reporting according to the EU method, • Reporting based on equivalent third-country national schemes, • Reporting based on reference values. From 1 January 2025 the EU method, as set out in the implementing regulations for the EU CBAM, will be the only acceptable method. Once fully in place, as of 1 January 2026, importers will need to declare the quantity of goods imported into the EU in the preceding year and their embedded emissions. The importer will then surrender a corresponding number of CBAM certificates which will be priced depending on the weekly average auction price of EU ETS allowances.
“ BIFA has seen guidance which states that in certain the indirect represent- ative of the non- established importer, could be the party cases the Customs agent, as required to submit the emissions data
18 | December 2023
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