Carbon Border Adjustment Mechanism (CBAM)

The European Commission’s (EC) proposed Carbon Border Adjustment Mechanism (CBAM) is meant to mirror the carbon price of the EU Emissions Trading System (EU ETS) for several imported goods. While the CBAM can rely on certain aspects of the EU ETS regarding its costs and compliance obligations, it also requires its own procedures and administrative structure. The EC’s proposal outlines a decentralised approach that largely relies on authorities in Member States for essential functions and enforcement, with oversight and coordination at the European level.

This report details the EC’s proposed administrative structure as well as its implications for Member States and key challenges going forward. The main challenge for the implementation of CBAM is the distribution of responsibilities between importers, third-country installations, verifiers, and authorities to ensure effectiveness of the instrument and a reliable monitoring, reporting and verification system. It is further crucial to find an appropriate balance between centralised and decentralised administrative structures, using existing capacities and providing harmonised and efficient procedures. The timeline for implementation needs to allow for the drafting of clear and robust implementing acts as well as sufficient time for involved firms and authorities to implement CBAM.