CBAM – Implementing act approved and guidance released


On 17 August 2023, the European Commission adopted the Implementing Regulation for the Carbon Border Adjustment Mechanism (CBAM). The approved Implementing Regulation and accompanying guidance: 

  • Confirms the reporting obligations for the CBAM Transitional Period, which commences on 1 October 2023. Furthermore, it confirms that the CBAM reporting requirements and methodology will provide some flexibility when it comes to the values used to calculate embedded emissions on imports during the transitional phase. During the first year of implementation (i.e. the first four quarterly CBAM reports), companies will have the choice of reporting in three ways. Importantly, as of 1 January 2025, only the EU method will be accepted: 
    • (a) full reporting according to the new methodology (the ‘EU method’); 
    • (b) reporting based on equivalent third country national systems; and 
    • (c) reporting based on reference values.
  • Provides for a series of EU-run webcasts, which will discuss CBAM for each of the directly impacted industries. More information on these can be found here.
  • Provides for a series of EU-run training sessions; and 
  • Provides further guidance on the calculation of embedded emissions. Critically, the use of ‘default values’ will not be limited for the first three quarterly CBAM reports (i.e. until 31 July 2024). After this point, default values may only be used for up to 20% of embedded emissions for complex goods.

What does this mean for your business?

If you are active in the cement, iron, steel, aluminum, fertilizer, electricity or hydrogen industries (or in the value chain of these products), you should begin to assess how CBAM will impact you. Whilst you may not have a direct reporting obligation, you should expect to receive information requests from those impacted.

PwC will host a webcast on 4 September to further discuss how CBAM may impact you and your industry. We will release an invite for this event early next week on LinkedIn. Once available, please complete the registration form to receive an invitation to our webcast.


An important part of the ‘Fit for 55 package’ is the European Union CBAM. The CBAM is a levy on the importation of certain goods (cement, iron, steel, aluminum, fertilizer, electricity or hydrogen),  as well as some precursors and a limited number of downstream products, into the EU and is aimed to better reflect the embedded carbon emissions resulting from the production of the goods alongside the EU ETS. We note that the government of Poland recently commenced procedures in the European Court of Justice to have CBAM annulled. Whilst this matter is still on-going, CBAM will (as it currently stands) still apply from 1 October 2023.

Approved Implementing Regulation and accompanying guidance

We are still in the process of analyzing the newly approved Implementing Regulation (and its volume of accompanying guidance), however, we have identified some key themes:

  • The approved Implementing Act has established good-specific system boundaries (i.e., all precursors and production routes that have to be taken into consideration when calculating the embedded emissions for a specific good). This should provide producers and operators with much more guidance on the calculation of embedded emissions.
  • The Commission appears to also implicitly acknowledge the onerous and complex nature of CBAM, and as such has provided a multitude of industry-specific guidance, as well as guidance for impacted producers and importers. These industry sections include information on the relevant greenhouse gas emissions, the calculation of direct and indirect emissions, definitions of sector specific production and associated activities and guidance on system boundaries for specific activities.
  • Default Values Concession – The approved Implementing Act confirms that the default values will not be a sustainable alternative for reporters and suppliers to rely on for the CBAM Transitional Period. The approved Regulation allows a declarant to rely on the Commission mandated default values for up to 100% of their embedded emissions up to 31 July 2024 (i.e. end of the 3rd reporting quarter of CBAM). After this point, default values may only be used for up to 20% of the embedded emissions. As a result, significant work will need to be completed prior to 31 July 2024, such that the relevant information can be extracted and compiled for reporting purposes. In addition, the verification of this information by 3rd party verifiers will only be mandated from 1 January 2026 (and voluntary until that point).
  • The Approved Annex III of the Implementing Regulation also provides for three various monitoring approaches. These include the Calculation-based approach (which is based on separate calculation of sources and has two sub-methods), the Measurement-based approach (where all emissions sources are monitored by a single operation) and Other approaches (which would be accepted in limited circumstances).

What’s next: 1 October 2023

The CBAM reporting obligation commences from 1 October 2023.  Companies should therefore start assessing whether (and how) they are affected by CBAM. In our experience,  many companies will likely inadvertently fall within the scope of CBAM, even though they would not immediately expect this considering the nature of their core business. For example, when production takes place in the EU, there could be a few imports per year of spare parts for machines that could trigger the CBAM obligations (financial, reporting or otherwise).  It is our expectation that many importers and suppliers will need to urgently prepare in order to gather the information required to enable the CBAM reports to be prepared, especially once the default value concession ends on 31 July 2024.