The carbon tariff as a tool to achieve carbon neutrality

What is the CBAM?

The Carbon Border Adjustment Mechanism (CBAM) is a key EU instrument to tackle carbon emissions and one of the core pillars of the “Fit for 55” legislative package.

The essence of this regulation is the collection of emission charges (known as the carbon tariff) on imports of raw materials and products, the production of which involves emitting large quantities of greenhouse gases.

The regulation aims to prevent businesses from circumventing the EU’s strict emission limits by relocating pollution-generating production to third countries with climate policy standards less stringent than those of the EU.

What products will be covered by the CBAM?

The regulation will take effect in two phases. The transitional phase is running from 1 October 2023 until 31 December 2025. While importers of goods to the EU do not pay fees for the so-called CBAM certificates during this period, they need to submit quarterly reports to the European Commission on the carbon dioxide emissions from their production.

The CBAM initial phase covers only sectors with high carbon emissions and high risk of carbon leakage. Specifically, this includes the following commodities and products originating in third countries:

  • cement,
  • electricity,
  • fertilisers,
  • iron and steel,
  • aluminium,
  • hydrogen,
  • products from the above goods.

Mandatory purchase of CBAM certificates from 1 January 2026

The mechanism takes full effect on 1 January 2026. From that date, importers will have to purchase the relevant amount of CBAM certificates to cover the emissions emitted in third countries in the production of their imports.  CBAM certificates will be priced with reference to the existing emissions trading system (EU ETS), i.e. the price per CBAM certificate at the time of purchase will directly reflect the average price per emission allowance auctioned off at a time closest to the purchase of the CBAM certificate. The price per emission allowance will be updated weekly.

How will the CBAM work?

For the purpose of submitting the above quarterly emissions reports, the European Commission has set up the CBAM Transitional Registry, which is available on the CBAM Trader Portal. The Customs Administration of the Czech Republic manages access to and registration in the Registry.

Effective 1 January 2026, importers will have to be registered as CBAM declarants, and will have a duty to submit an annual CBAM declaration and pay for the emissions contained in the imported goods. Applications for this registration are to be submitted during 2025.

The CBAM as a goal to achieve climate neutrality

The CBAM mechanism is designed to operate in parallel with the EU emissions trading system (EU ETS). The mechanism is to provide an alternative system to shield European businesses from competition from third countries, ensure a level playing field, and prevent the aforementioned carbon leakage. If a non-EU country already operates an emissions trading system comparable to the EU ETS, the mechanism will have no impact on the product price. Rather than demanding payment for carbon emissions twice, the mechanism aims to incentivise more countries to charge for emissions. As such, the regulation is another instrument to help the EU achieve climate neutrality by 2050 at the latest.

If you need more information about the CBAM, please feel free to contact us.

RSM Authors

Anna Pačesová

Head of Corporate Services

Taťána Mitášová

Senior Consultant