Omnibus Package: investors urge caution as EU sustainability rules overhauled
Adopted with Regulation (EU) 2023/956 and effective from October 1, 2023, the Carbon Border Adjustment Mechanism (CBAM) is a key tool of the EU Green Deal and specifically the Fit for 55 package. It also prevents unfair competition between EU and non-EU companies, positively impacting the competitiveness of the Union's industry.
The imminent modification of the mechanism as part of the broader simplification by the new EU Commission with the Omnibus Simplification Package was announced during the presentation of the EU Competitiveness Compass and recently confirmed by European Climate Commissioner Wopke Hoekstra. Potential adjustments to the CBAM could include simplifying emission reporting processes, extending the mechanism to other sectors, and exempting small businesses.
Carbon Border Adjustment Mechanism - CBAM: What It Is and How It Works
The “Carbon Border Adjustment Mechanism” applies a price to emissions embedded in products from certain industries, comparable to the cost borne by EU producers under the EU Emissions Trading System - ETS. The EU ETS requires companies in the 27 member states to purchase emission allowances to offset carbon emitted during production.
The main goal of the CBAM is to ensure that the EU's GHG emission reduction efforts are not undermined by a simultaneous increase in emissions outside Europe due to the import of high CO2 intensity goods from non-EU countries. This economic measure also prevents the phenomenon known as “carbon leakage,” where industrial production shifts to countries with less stringent environmental regulations.
Regulation (EU) 2023/956 establishes two phases for implementing the mechanism.
During the first, “transitional” phase, which began on October 1, 2023, and will end on December 31, 2025, the emission tax on imported products is not applied, but information on the quantities of products subject to the CBAM is collected.
