On 15 March 2022 the Council agreed to the draft CBAM Regulation, thereby accelerating its ambition concerning decarbonization by targeting EU imports of carbon-intensive goods and protecting the EU market from countries with less ambitious climate goals. The main objective for enacting CBAM was to prevent carbon leakage and encourage trading countries to adopt a mechanism to tax carbon content.

Currently, only specific carbon-intensive sectors like aluminum, cement, iron and steel, fertilizers and electricity are covered by CBAM. However, it is foreseen that both on the listed products (based on customs commodity codes), as well as on the targeted industries, the application field will be extended. Please note that in addition to the product classification, the country of origin for the sourced products will also play a role as, for example, goods originating from EFTA countries are exempted.  

As of 1 January 2023, reporting obligations will apply to EU imports of the targeted products, and the imports will need to be performed by authorized declarants. The time is now for companies to assess their supply chain and see what the impact of CBAM will be on their imports.


CBAM was first introduced as a part of the European Green Deal, which serves as a guide for both tax and non-tax policy initiatives in the EU to achieve its ambitious target of becoming climate neutral by 2050.

This was followed by a proposal for a regulation on CBAM on 14 July 2021 as part of the “Fit for 55” policy package, aiming to reduce greenhouse gas emissions (GHG) by at least 55% by 2030, from the levels of 1990. This is an objective and policy plan in line with the EU’s commitment to global climate and its ambition to achieve the targeted climate neutrality of 0% net emissions by 2050, as part of the EGD.

CBAM levies a carbon price on the imports of the target goods with the intention of equivalent carbon pricing on imports, mirroring the EU Emissions Trading System (ETS) for production in the EU. This is to ensure the competitiveness for both the manufacturers of the ETS-covered goods in the EU and the importers of CBAM-covered goods in the EU, making the Customs Union attractive for those companies and countries which produce and export less emission-intensive goods. Conversely, it signals disruptive changes and new roles and responsibilities for the customs authorities in the EU, as well as companies importing the covered goods.

Next Steps

CBAM, as a new carbon pricing framework in the EU, is certain to have a disruptive impact on the companies trading in the likely growing list of covered commodities. It is also expected to have a disruptive impact on general global trade.

The latest approval of CBAM by the European Council has rapidly evolving consequences for businesses involved in the cross-border import of goods, with GHG-embedded emissions, into the EU.

The existing list of CBAM goods is clearly defined in the regulation including the customs classification codes. However, the “goods in scope” is the core element in the ongoing, heated debate, with the expected inclusion of more sectors and additional commodities (as with the EU ETS).

It is critical for companies and importers of CBAM goods into the EU to remain well-informed of these developments and begin evaluating the overall impact on their business activity, which may not be limited to their customs data only. The new regulations could also impact their sourcing and supply chain. Quantifying the exposure to carbon costs, CBAM goods will inevitably become more expensive, as will the administrative costs related to this tax measure. Businesses should start focusing on their data elements, quality and availability and prepare for a global supply chain review of the implications of CBAM on their business model, set-up and trade flows in order to stay competitive.

Amongst the most urgent prerequisites in order for EU companies to be CBAM compliant is the adherence to reporting obligations from 1 January 2023. Businesses are required to report, on a quarterly basis, the embedded emissions in the imported goods (during that quarter of a calendar year), detailing both the direct and indirect emissions, as well as any carbon price effectively paid in the country of origin.

Moreover, the initially foreseen transition period for businesses to smoothly adapt to CBAM regulations and minimize the disruptive impact on trade, which is from 1 January 2023 to 31 December 2025 may be brought forward to 31 December 2024.

As additional products become part of the expanded scope of CBAM, more and more businesses will need to prepare for its implementation. In order for businesses to be properly prepared for the upcoming transition period and minimize the disruption to their business models and costs, we recommend all EU importers to be ready for the reporting obligations as of 1 January 2023.   


Author: Hira Khan, Sr Trade Adviser Indirect Tax 



KPMG’s Global Trade and Customs Practice provides specialized assistance in global trade and customs matters, including CBAM. Along with our global network of Trade and Customs experts and our professionals in ESG, sustainability and green taxes, we can assist you with an initial check for CBAM implications for your business and if required, conduct a wider supply chain review in the view of compliance and implementation of CBAM.

For more information about the impact of CBAM on your company, please contact one of our experts.