June 22, 2023

To: CEOs / Managing Directors / Export Managers / Marketing Managers

Implementation of EU Carbon Border Adjustment Mechanism (CBAM)

The European Union (EU) has introduced the Carbon Border Adjustment Mechanism (CBAM) regulation which entered into force on May 16, 2023. The CBAM aims to prevent carbon leakage by subjecting the import of certain groups of products from third [non-EU and non-European Free Trade Association EFTA)] countries to a carbon levy/tariff linked to the carbon price payable under the EU Emissions Trading System (ETS) when the same goods are produced within the EU.

Among the goods that are subject to the new regulation include iron and steel, cement, fertilisers, aluminium, electricity, and hydrogen. The scope will additionally include a limited number of downstream products. The transitional period for the CBAM is expected to start on October 1, 2023 and ends on December 2025, during which EU importers must submit quarterly CBAM-reports, stating their imports of the CBAM products, as well as the emissions embedded in their imported products. Such emissions are proposed to include direct and indirect emissions occurring during the production process of the imported goods.

On June 13, 2023, the European Commission has published a first call for feedback on the draft rules governing the implementation of CBAM during its transitional phase which provided the reporting obligations and information sought from EU importers of CBAM goods, as well as the provisional methodology for calculating embedded emissions released during the production process of CBAM goods.

The link for the public consultation can be found online: https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13873-The-reporting-obligations-during-the-transitional-period-of-the-carbon-border-adjustment-mechanism_en

Members are encouraged to provide feedback on the above public consultation before July 11, 2023.

For further information, please contact FMM Secretariat, Ms Jess Chong at tel: 03-62867200 or e-mail: jess@fmm.org.my.