Background on the EU’s Carbon Border Adjustment Mechanism (CBAM)
The European Union, comprising 27 countries, has recently backed a proposal to exempt small importers from paying climate tariffs on iron, steel, aluminum, cement, and fertilizers. This exemption comes with a new ‘de minimis’ threshold of 50 tonnes.
Who is Affected?
This change, proposed by the European Commission as part of an administrative simplification package, will affect around 182,000 importers, 90% of which are small and medium-sized enterprises (SMEs). The adjustment is expected to save an estimated €1.12 billion while still covering over 99% of emissions.
What are the Changes?
- Simplified authorization procedures for declarants (those looking to import subject goods);
- Improved emissions calculation and financial responsibility management;
- Strengthened measures to prevent abuse.
The Carbon Border Adjustment Mechanism (CBAM)
Also known as the ‘climate tariff,’ the Carbon Border Adjustment Mechanism (CBAM) is a tool employed by the EU to equalize carbon pricing between European goods subject to the Emissions Trading System (ETS) and imported products. This mechanism aims to encourage greater climate ambition in non-EU countries.
Impact and Next Steps
With the ministers agreeing on this position, including some technical amendments to the European Commission’s proposal, the Council and Parliament can now initiate negotiations for the final legislative version.
Key Questions and Answers
- What is the new ‘de minimis’ threshold? The EU has introduced a 50-tonne threshold, exempting small importers from climate tariffs.
- Who benefits from this change? Approximately 182,000 importers, mostly SMEs, will be affected positively by this adjustment.
- What is the estimated financial impact? The EU anticipates a savings of around €1.12 billion.
- What is the Carbon Border Adjustment Mechanism (CBAM)? The CBAM is a tool that aims to equalize carbon pricing between European goods and imported products, promoting climate ambition in non-EU countries.
