European Commission adopts final Implementing Regulation for transitional phase of CBAM

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EY Global

18 Aug 2023
Subject Tax Alert
Jurisdictions European Union
  • The European Commission has adopted the Implementing Regulation providing the rules for the transitional phase of the EU's Carbon Border Adjustment Mechanism.
  • This Alert sets out the key differences between the draft and final Implementing Regulation.
General overview

In advance of the 1 October 2023 implementation of the EU's Carbon Border Adjustment Mechanism (CBAM), the European Commission has adopted and published the Implementing Regulation (regulation) for the regime. The regulation, adopted on 17 August 2023, sets out rules governing the transitional phase of the CBAM, which runs to 31 December 2025.

A draft version of the regulation was published on 13 June 2023, with a month-long consultation collecting the views of stakeholders on the design of the requirements during the transitional phase. The final regulation contains some key clarifications and differences from the draft version, as explained below.

Additional documentation has been published covering the transitional methodology for calculating embedded emissions released during the production process of CBAM goods. Guidance has also been published for EU importers and non-EU installations on the practical implementation of the new rules. At the same time, dedicated information technology (IT) tools to help importers perform and report these calculations are currently being developed, as are training materials, webinars and tutorials to support businesses when the transitional period begins.

Detailed discussion

Use of default values

The Implementing Regulation confirms that declarants will be permitted to use default values to report embedded emissions of imports covered by the CBAM. However, these may only be used where actual data on the embedded emissions of specific goods at the installation level is not available. Where this is the case, the following conditions apply:

  • Until 31 December 2024, alternative methods covered by existing carbon pricing schemes, compulsory emission monitoring schemes or verified emissions monitoring schemes can be used to calculate embedded emissions
  • Until 31 July 2024, and only where the above data is not available, default values published by the Commission can be used to calculate embedded emissions
Use of estimated values

The final regulation has clarified detail on the use of estimated values where actual emissions data is not available from installation operators.

In addition to updating the language previously used, the final regulation confirms that reporting declarants may rely on "estimated values" from operators to calculate up to 20% of the total embedded emissions of complex goods. Furthermore, wording restricting the use of these estimates to the transitional phase has been removed.

Modification of CBAM reports

Reporting declarants may still modify submitted CBAM reports for two months after submission; reports for the first two reporting periods may be modified until the third report is due. The draft regulation included a provision allowing reporting declarants to submit a request to update reports beyond these deadlines, with a justified reason. The final regulation confirms that these requests will only be considered for one year following the submission of a report.

Verification of CBAM reports

The final regulation has confirmed that during the transitional phase, reporting declarants will not be required to verify quarterly CBAM reports via an independent verifier.

Inward processing

As set out in the draft regulation, where goods placed under inward processing (typically raw materials imported for production into other goods) are subsequently released for free circulation, importers must submit CBAM reports containing information on the embedded emissions of the goods.

The final regulation sets out additional detail on the calculations of embedded emissions for processed products placed under inward processing that are subsequently released. Under this scenario, embedded emissions should be calculated using the weighted average embedded emissions of the goods under the same CBAM goods category.

Polish objection to CBAM

Separately, the Polish Government has filed a request to annul the CBAM regulation, arguing that its provisions are primarily fiscal (tax) in nature and therefore require a unanimous vote to pass. This action could take several years to resolve and, in the meantime, the rules are expected to operate, so businesses need to continue preparing for their CBAM compliance obligations. (See our EY Global Tax Alert, Polish Government seeks annulment of CBAM regulation in European Court of Justice, 15 August 2023.)

Next steps

The introduction of the CBAM will have both direct and indirect impacts on businesses trading into the EU. A holistic approach across value chains is required to effectively map and mitigate the impacts of the regime. More information with concrete actions that businesses should be taking now to prepare can be found here.

Further information

If you would like to discuss any of the issues raised in this Alert, please contact the individuals listed below, or your usual EY contact.


For additional information with respect to this Alert, please contact the following:

Carbon Border Adjustment Mechanism
  • Richard J. Albert, Carbon Solution Leader, Leipzig
  • George Riddell, London
  • Mark Feldman, London
  • Danny Vu, London
  • Eduard Kurz, Vienna
  • Philippe Lesage, Diegem
  • Milen R Raikov, Sofia
  • Ashish Sinha, Zurich
  • Andy SY Leung, Shenzhen
  • Bente Thenning, Kopenhagen
  • Pedro Gonzalez-gaggero Prieto-carreño, Madrid
  • Marguerite Trzaska, Paris
  • Aron Nagy, Budapest
  • Alessandra di Salvo, Rome
  • Yoichi Ohira, Tokyo
  • Martijn Schippers, Rotterdam
  • Delphine Poirot, Oslo
  • Kasia Klaczynska-Lewis, Warsaw
  • Slawomir Czajka, Warsaw
  • Zoran Dimoski, Stockholm
  • Ilona van den Eijnde, New York
  • Duane Newman, Johannesburg
EMEIA Sustainability Tax Services
  • Anastasiia Aristarkhova, Amsterdam

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.