The Carbon Border Adjustment Mechanism (CBAM) entails – similarly to the system of allowances under the EU ETS – the surrendering of certificates (CBAM certificates) by importers, based on the embedded emission intensity of the products they import in the EU and purchased at a price corresponding to that of the EU ETS allowances at any given point in time. These certificates will not be linked to the EU ETS system of allowances but will mirror the price of these allowances to ensure a coherent approach to the pricing under the EU ETS.
The CBAM certificates' features differ from emission allowances under the EU ETS system.
CBAM certificates' features
according to the European Commission Proposal of 14 July 2021 for a Regulation of the European Parliament and of the Council establishing a carbon border adjustment mechanism (COM(2021) 564 final, 2021/0214 (COD))
2. This average price shall be published by the Commission on its website on the first working day of the following calendar week and shall be applied from the following working day to the first working day of the following calendar week.
3. The Commission is empowered to adopt implementing acts to further define the methodology to calculate the average price of CBAM certificates and practical arrangements for the publication of the price.
4. Recital 21 of the draft Regulation reads: "In order to preserve its effectiveness as a carbon leakage measure, the CBAM needs to reflect closely the EU ETS price. While on the EU ETS market the price of allowances is determined through auctions, the price of CBAM certificates should reasonably reflect the price of such auctions through averages calculated on a weekly basis. Such weekly average prices reflect closely the price fluctuations of the EU ETS and allow a reasonable margin for importers to take advantage of the price changes of the EU ETS while at the same ensuring that the system remains manageable for the administrative authorities".
Data necessary to calculate the amount of CBAM certificates to be surrendered will have to be included in the customs declaration. European Commission’s Impact Assessment documents (published as an integral part of the Fit for 55 package) read in this regard:
"As the CBAM based on import certificates would also be calculated at the point of import, customs authorities will need to collect and, depending on the roles given to either customs authorities and the CBAM Authority/national authorities, process the information related to the imported product. Data necessary to calculate the amount of CBAM certificates to be surrendered would have to be included in the customs declaration and either certificates will be directly surrendered or added up for a final balance for a full calendar year. While customs will always have an important role, the option of requiring a surrender or proof of surrender of the certificates at the time of import will have a significantly higher impact on customs costs".
The price of CBAM certificates is based on the weekly average auctioning price for EUAs (for weeks in which no auction is scheduled, the last week's average will be used).
It is noteworthy, on 15 March 2022 the Council agreed on the Carbon Border Adjustment Mechanism. Compared to the initial proposal by the European Commission, the Council opted for a greater centralisation of the CBAM governance, in particular, according to the Council, the new registry of CBAM declarants (importers) is to be centralised at EU level.
On 16 May 2023 Regulation (EU) 2023/956 of the European Parliament and of the Council of 10 May 2023 establishing a carbon border adjustment mechanism has been published in the EU Official Journal.