On 17 August this year, the European Commission published the Implementing Regulation laying down the rules for the application of Regulation (EU) 2023/956 of the European Parliament and of the Council (hereinafter referred to as: “CBAM Regulation”) with regard to reporting obligations for the purposes of the mechanism of adjusting prices at borders taking into account CO2 emissions during the transitional period (hereinafter referred to as: “Implementing Regulation”) specifying the assumptions of the Carbon Frontier Tax (CBAM).
Let us remind you that from 1 October this year, entrepreneurs will face new, quarterly reporting obligations related to the need to determine the level of emissions related to the production and transport of imported products listed in the CBAM Regulation, or to determine their origin. A more detailed discussion of these obligations can be found here: https://www.ulve.pl/en/border-carbon-tax-adopted-from-1st-october-a-series-of-new-obligations-for-entrepreneurs/.
Thus, in connection with the entry into force of the above-mentioned regulations, the European Commission has developed the first implementing provisions appropriate for the transitional period.
Importantly, the transitional period starting on 1 October this year will last until the end of 2025. Already in this phase of the application of these regulations, entrepreneurs will face a number of obligations, such as reporting carbon dioxide emissions related to the import of specific goods listed in the CBAM Regulation. By the way, which in our opinion is important, during this time, apart from reporting obligations, entrepreneurs will not incur any additional fees or taxes. However, this will change from January 1, 2026, when I commit them to purchase, the so-called CBAM certificates, which will affect the cost of imported goods listed in this regulation.
Returning to the Executive Regulation, it published a number of information important from the point of view of both entrepreneurs and government institutions. Below we present, in our opinion, the most important of them.
The Implementing Regulation regulates:
I. Factsheet to be covered by the reporting obligation
In the quarterly report, each reporting entity will be required to provide information on:
- Goods listed in Annex I of the CBAM Regulation, i.e.
- the quantities of goods imported (expressed in megawatt hours for electricity and tonnes for other goods);
- the type of goods identified by their CN code.
- In addition, it will be necessary to provide, in the field of embedded emissions, information such as:
- the country of origin of the imported goods;
- the installation where the goods were produced;
- the production paths used, reflecting the technology used to produce the goods, and information on the detailed parameters qualifying the chosen production path;
- specific direct embodied emissions associated with commodities,
- reporting requirements that affect embedded emissions from commodities;
- emission factor and data source when the imported commodity is electricity;
- in the case of steel products, the identification number of the specific steel mill where the batch of raw materials was produced, if known.
- At the same time, for specific indirect embodied emissions, each reporting reporter shall report in the CBAM reports the following information listed in Annex I to this Regulation:
- the consumption of electricity, expressed in megawatt hours, of the production process per tonne of goods produced;
- information indicating whether the notifier reports actual emissions or default values made available and published by the Commission;
- the relevant emission factor for the electricity consumed;
- the amount of specific indirect embodied emissions.
II. Methods for calculating embedded emissions with an indication of the possibility of using estimates
Another important issue referred to in the Implementing Regulation is the specific methods for calculating embedded emissions described in Article 4 of that Regulation.
At the same time, it is stipulated that in the absence of data available on embodied emissions, importers will be able to rely on estimates made available from installation operators. Importantly, however, it will only be possible to use estimates by way of derogation up to 20% of total emissions of embedded goods.
III. Formal obligations regarding the submission of CBAM reports
At the same time, the Implementing Regulation indicates that for each quarter from 1 October 2023 to 31 December 2025, the reporting obligation notifier submits CBAM reports in the CBAM interim register no later than one month after the end of the quarter.
Importantly, the reporting obligation shall provide information and indicate in the CBAM interim register whether:
- the CBAM report shall be submitted by the importer in his own name and on his own behalf;
- the CBAM report shall be submitted by the Indirect Customs Representative to the importer.
IV. Methods of modification and correction of CBAM reports
It is also important to note that the reporting obligation notifier may modify the submitted CBAM report within two months from the end of the relevant reporting quarter.
It is also indicated that, by way of derogation, a reportable notifier may modify the CBAM reports for the first two reporting periods up to the deadline for submitting the third CBAM report.
However, in order to make such a correction, it will be necessary to submit an appropriate application to the competent authority, which may allow the correction to be made.
V. Other information
In addition to the above issues, the Implementing Regulation also includes:
- information on data collection and reporting on the inward processing procedure;
- issues relating to the greenhouse gas price due;
- a number of conditions relevant to the administration of CBAM reporting by government institutions.
To sum up, in Ulve’s opinion, these regulations in the field of Carbon Border Tax (CBAM) will significantly affect many entrepreneurs, forcing them de facto to create mechanisms allowing them to extract from their business processes the information and data necessary to be included in the quarterly CBAM report. Importantly, much of this information or data will be difficult to reproduce, which will somehow determine the need to aggregate them on an ongoing basis. Therefore, it seems necessary, or at least very sensible, to start preparing for the implementation of such mechanisms now. It should be remembered that the entrepreneur should collect this data and information already for the fourth quarter of 2023 (starting from October 1, 2023), and the first report will have to be submitted by January 31, 2024.
The entire text of the Implementing Regulation can be found here: https://eur-lex.europa.eu/resource.html?uri=cellar:376830d4-3d05-11ee-aaec-01aa75ed71a1.0017.02/DOC_1&format=PDF
In turn, the CBAM Regulation here: https://eur-lex.europa.eu/legal-content/PL/TXT/?uri=CELEX%3A32023R0956