European CO2 Reporting Requirement Program Cast

Oct. 3, 2023
By: Pietro N. Bianchi

The European Commission (EC) recently implemented a regulation requiring importers of CO2-intensive goods into the European Union (EU) starting on October 1^st, 2023 to submit a quarterly report on the CO2 emissions caused by the production of the imported goods. The implementation regulation specified what information must be included in emissions reports and how emissions should be calculated. Carbon has been at the center of trade talks over the past over the past few years (you can read more about developments in this topic here, here, and here). The EC’s recent implementation regulation is only Europe’s latest step taken on its path toward carbon neutrality.

As emissions standards and environmental regulations strengthened in the U.S. and EU, “dirty” manufacturing has been outsourced to other countries, reducing the impact of legislation and creating a competitive edge for foreign manufacturers. The EU’s Emissions Trading System (ETS) targets these shortcomings by requiring EU companies to buy a Carbon Border Adjustment Mechanism (CBAM) for imported goods. CBAMs are emissions certificates that EU importers must buy to account for the emissions used in the production of imported CO2-intensive goods.

CO2-intensive goods include but are not limited to aluminum, iron, steel, cement, and fertilizers. Failure to purchase CBAMs or importing goods produced with emissions levels that exceed the credit of purchased CBAMs may lead to large fines.

Importers must submit their CBAM emissions reports within one month of the end of each quarter, making the first report due by January 31, 2024. Notably, companies currently only must report the emissions on imported goods subject to CBAMs. This transition period will end on December 31, 2025, when importers will have to start paying for CBAMs as well. This is in step with the EU’s ETS agenda announced in December 2022, which you can read about here. It is yet to be seen what effect emissions data will have on the agenda of ETS and Europe’s path towards carbon neutrality or whether ETS will be effective in combating the outsourcing of emissions.

If you have questions about imports, exports, or carbon border adjustments do not hesitate to contact an attorney at Barnes Richardson, & Colburn LLP.