The Carbon Border Adjustment Mechanism (CBAM) is an EU regulation that aims to prevent carbon leakage from the EU by applying a carbon price that mirrors the EU Emissions Trading System (ETS) for third country imports. In Ireland, the implementation of CBAM is overseen by the Department of Climate, Energy and the Environment, and the EPA is the relevant authority.
The objective of CBAM is that prices of goods imported into the EU more accurately reflect their carbon footprint, while also encouraging third countries and EU importers to reduce their emissions. CBAM covers carbon intensive products deemed most at risk of carbon leakage such as steel, cement, iron, fertilisers, electricity, aluminium and hydrogen. The impacts of the regulation therefore fall disproportionately on these sectors.
CBAM was implemented in October 2023 and operated in a ‘Transitional’ phase until 31 December 2025, during which time there were no financial costs applied. CBAM entered its ‘Definitive’ phase on 1 January 2026. Companies in scope are now required to verify the embedded emissions of their imports and submit CBAM Certificates to cover them. The first submissions will take place in 2027 to cover 2026 emissions.
Following a revision in the EU Simplification Omnibus package, the administrative burden facing businesses under CBAM has been reduced. The original threshold for entering scope of CBAM was a €150 value for any relevant item being imported. In practice, this meant that many small imports were required to comply. The embedded emissions of these small imports were found to be relatively low in general. The Omnibus therefore removes the obligation on small businesses to review the emissions of potentially complex supply chains, and a new threshold was established. A de minimis exemption has been introduced for companies importing less than 50 tonnes annually of goods subject to the CBAM. This measure exempts approximately 90% of EU importers from the CBAM, while still covering 99% of emissions in scope.
Its my understanding that the financial obligations under the CBAM will be phased in gradually, in parallel with the phaseout of free allocation under the EU ETS from 2026-2034. This will involve the purchase and surrender of CBAM certificates by 30 September 2027 corresponding to the embedded emissions associated with the goods imported in 2026. Imports on which an explicit carbon price has already been paid, such as a carbon tax or the industrial carbon pricing system in Canada, will be exempted or face a reduced charge. Where the carbon price paid is equal to or above the CBAM price, no CBAM charge will arise.
CBAM forms part of an overall drive to decarbonise and improve the competitiveness of EU manufacturing sectors, including energy-intensive industries. My Department works closely with Enterprise Ireland and IDA Ireland to support the development of a sustainable enterprise environment, providing targeted supports to businesses which enable them to become more competitive and resilient through decarbonisation. Where SMEs are clients of these agencies I would recommend direct engagement with them to assess where they may need support or advice on compliance with the CBAM obligations, equally, any business within the scope of the regulation can contact the EPA seeking guidance and assistance in understanding and complying with their obligations.
I appreciate that the obligations under CBAM may prove challenging to implement for some importers of products in scope. I will work with Minister O'Brien to help ensure that implementation of the regulation at EU and national level is as straightforward and predictable as possible.
