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Discover how CBAM transforms compliance into opportunities for sustainable business growth: Know more about the roadmap and impact on Indian companies.
CBAM Reporting
On 10 May 2023, the EU co-legislators signed the CBAM Regulation, which officially entered into force the day after its publication in the EU Official Journal on 16 May 2023. On 17 August 2023 the EU Commission adopted its implementing regulation laying down reporting obligations for the purposes of CBAM during the transitional period.
The transitional period, during which importers are required to comply with a quarterly reporting requirement of their imported CBAM goods and embedded greenhouse gas emissions, started on 1 October 2023.
What is CBAM Reporting?
The European Union’s Carbon Border Adjustment Mechanism (CBAM) requires EU importers to report the carbon footprint of certain goods imported from non-EU countries.
CBAM reporting is required for:
- EU Importers: Companies or entities established within the EU that import goods listed in Annex I of the CBAM Regulation from third countries.
- Indirect Customs Representatives: Businesses acting on behalf of importers to clear goods through EU customs can also be responsible for CBAM reporting, with their explicit agreement and using their own EORI number.
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How is CBAM Impacting Indian Companies?
The implementation of Carbon Border Adjustment Mechanism would impact Indian companies drastically. The exports affected by CBAM regulations are estimated to be over $37 billion. CBAM is expected to impose a 20-35% tax on the products mentioned above. Also, Indian exporters need to produce CBAM certificates to trade in the European Economic Area (EEA).
features of the CBAM framework
Carbon Pricing on Imports
CBAM introduces a carbon cost on selected imported goods, ensuring they face the same carbon price as products manufactured within the EU. This prevents cheaper, high-emission imports from gaining an unfair advantage and encourages global alignment with EU climate standards..
The mechanism initially targets industries with the highest carbon footprints—such as steel, cement, aluminium, fertilisers, electricity, and hydrogen. These sectors are chosen because they contribute significantly to global emissions and are vulnerable to carbon leakage.
During the transitional period, importers must report the embedded emissions of their products accurately. This includes direct emissions and, in some cases, indirect emissions. The goal is to build transparency, improve data accuracy, and help companies prepare for full compliance.
From the full implementation phase onward, importers must buy CBAM certificates that reflect the carbon price gap between the EU and the exporting country. This ensures that imported goods bear an equivalent carbon cost, promoting cleaner production methods globally.
Focus Area Of CBAM Framework
The goods currently subject to CBAM reporting are:
- Iron and Steel
- Aluminum
- Cement
- Fertilizers
- Electricity
- Hydrogen
Key points regarding CBAM reporting obligations:
- Transitional Phase (October 2023 – December 2025): Importers must submit quarterly reports detailing greenhouse gas emissions embedded in their imports, but are not required to buy CBAM certificates.
- Definitive Regime (from January 2026): Importers will be required to buy and submit certificates for reported emissions, and annual CBAM declarations will replace quarterly reports.
- De Minimis Threshold: Proposed changes would set an annual threshold of 50 tonnes for imported CBAM goods, potentially exempting smaller importers, primarily SMEs, from reporting obligations.
If an EU-based importer brings the listed carbon-intensive goods into the EU market from a non-EU country, they are likely subject to CBAM reporting requirements.
Why CBAM Reporting Framework is Important?
1. Prevents Carbon Leakage: Without CBAM, companies might move production to countries with weaker climate policies to avoid paying for emissions in the EU.
CBAM stops this by applying a carbon cost to imported goods, so polluting abroad won’t give a price advantage.
2. Levels the Playing Field: EU manufacturers must pay a carbon price under the EU Emissions Trading System (ETS). If foreign competitors didn’t pay a similar cost, the EU industry would be unfairly penalized. CBAM ensures that both EU-made and imported goods face a comparable carbon cost.
3. Drives Global Climate Action: CBAM encourages non-EU countries to:
- Improve emissions tracking
- Adopt cleaner technologies
- Introduce carbon pricing mechanisms of their own
It becomes a soft pressure tool to raise global environmental standards.
4. Promotes Transparency in Supply Chains:
CBAM Reporting forces importers to:
- Trace the emissions of raw materials and goods
- Collect environmental data from suppliers
This leads to greater accountability for emissions across global value chains.
5. Smooth Transition Before Financial Penalties (2023–2025)
The current reporting-only phase (till 2025) gives businesses time to:
- Understand the framework
- Train teams and build data systems
- Engage with suppliers
Before actual payments begin in 2026, companies can adapt without financial pressure.
6. Boosts Clean Tech & Innovation:
By putting a cost on carbon-heavy imports, CBAM:
- Makes green products more competitive
- Encourages industries to invest in low-carbon processes
- Supports the EU’s Green Deal & net-zero goals
It ensures that climate leadership doesn’t become a competitive disadvantage, and helps global trade move toward carbon transparency and accountability.
How does the CBAM Reporting Framework work?
In two ways, the CBAM Reporting Framework works, which is mentioned below:
- Transitional Phase: During this phase, EU importers are required to report the direct and indirect greenhouse gas emissions embedded in their CBAM-subject imported goods. These reports are submitted quarterly through the CBAM Transitional Registry. Importers are not required to buy or surrender carbon certificates during this period.
- Definitive Phase: Importers will submit an annual declaration detailing the embedded emissions of their imported goods. They must purchase CBAM certificates equivalent to these emissions. The price of certificates is based on the weekly average auction price of EU ETS allowances, with deductions possible for carbon prices already paid in the country of origin. An accredited third party must verify emissions data, and certificates are surrendered annually.
Elements of the Mechanism
- CBAM certificates: Financial instruments representing the obligation for embedded emissions in the definitive phase.
- Embedded emissions: GHG emissions from the production of imported goods, calculated using specific EU methods.
- EU ETS: The EU’s internal carbon pricing system that CBAM complements.
- Sectors covered: Initially includes cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen.
In essence, CBAM applies a carbon price to carbon-intensive imports comparable to that faced by EU producers under the ETS, promoting fair competition and cleaner Global Production.
How we Sustrack help
Sustrack’s Global Trade Advisory specialists are part of a global network of professionals who provide specialised assistance in global trade and customs matters. Our professionals can support in carrying out an initial CBAM impact assessment and broader supply chain reviews in the light of the CBAM implementation, transitional period and compliance requirements. We can assist businesses with:
- Carrying out an impact assessment of CBAM on their product portfolio;
- Performing a high-level check on availability of emissions data and preliminary (financial) impact assessment of purchasing CBAM certificates based on the product scope, emissions data, and current EU ETS pricing;
- Reviewing the origin and sourcing patterns of in-scope products to determine possibilities for exemptions or reductions under CBAM; and
- Reviewing organizational preparedness and advising on assigning roles and responsibilities.
To assist companies during the transitional period, Sustrack is developing the CBAM Compliance Manager; a digital solution that enables companies to automate their CBAM Reporting obligations. This allows businesses to prepare and manage quarterly CBAM reports as follows:
- The solution can be used to submit requests for CBAM information (production site and emissions data) to suppliers;
- Emissions are automatically allocated based on supplier information – either via a fully automatic system-to-system interface or via a manual upload of emissions data;
- In the event that emissions data is not available, the solution enables decision making based on default emissions data as fallback methods.
If you have questions about the CBAM and its impact on your business including our capabilities for assistance in this regard, do not hesitate to contact us.