Things exporters should know about the EU CBAM (Current Issue No.3322)

The Carbon Border Adjustment Mechanism (CBAM) is one of the key elements of the ‘Fit for 55’ package under the  European Green Deal, which sets out a clear path towards realizing the EU’s target of a 55 percent reduction in carbon emissions compared to 1990 levels by 2030 and to become a net-zero continent by 2050. Before any goods that cost more than EUR150 per consignment and are within the scope of the EU CBAM, i.e., those in the initial five targeted industries, namely cement, electricity, fertilizers, iron, steel and aluminum, are imported from non-EU member states, an importer must apply to the competent authority in the EU Member State where it is established for authorization to import those goods into the customs territory of the Union. Once authorized, an importer is required to submit to the competent authority a CBAM declaration, which must include certain information relating to the embedded emissions in imported goods. The CBAM declaration will begin to take effect in 2023, with a transition period until 2025. Once it begins to be fully enforced in 2026, an importer must submit a report on product details along with evidence of fee payment and CBAM certificates by May 31 each year. The EU Parliament’s Environment Committee has also proposed widening its initial scope to organic basic chemicals, hydrogen, ammonia and polymers, as well as adjusting the calculation method for the volume of GHG emissions, and reducing the reporting duration, which means that exporters will have to pay more carbon fees sooner than before.

Given this, Thai exporters in said targeted industries should understand the EU CBAM while also accelerating their efficiency and the reduction of GHG emissions in their manufacturing processes. They are also advised to put in place a standard system for collecting GHG data in their manufacturing processes in order to enhance their competitiveness, maintain their customer base abroad, and brace for more stringent environmental standards in the EU and other trade partners such as the US because they are scheduled to enforce laws with the aim of imposing carbon fees on imported goods in the targeted industries, as well.