CBAM: the EU’s carbon levy

The EU has set itself a number of goals, as part of the European Green Deal, including a 2030 target of a 55% reduction in carbon emissions compared to 1990 levels.  One feature of the European Green Deal is the introduction of the EU’s Carbon Border Adjustment Mechanism (“CBAM”). The CBAM seeks to prevent ‘carbon leakage’ and to encourage cleaner industrial production systems in non-EU countries, by introducing a levy on products imported into the EU which are carbon-intensive. Currently, the levy applies to iron, steel, aluminium, cement, electricity, fertilisers and hydrogen, that are produced outside the EU. 

At the moment, we are in the transitional period for CBAM and there are currently no financial obligations for importers. Instead, importers have CBAM reporting obligations during this transitional period and must make quarterly reports in respect of the CBAM products which they import via the EU transitional CBAM registry.  Implementing Regulation (EU) 2023/1773 applies as regards the CBAM reporting obligations during this period (the “Transitional CBAM Regulation”). 

Regulation (EU) 2023/956 (the “CBAM Regulation”) sets out the rules for the definitive CBAM regime which will commence on 1 January 2026. The definitive regime entails financial obligations in respect of the emissions associated with imported goods, which importers must declare annually. From 2026,  importers of CBAM products must declare the emissions embedded in their imports and purchase and surrender the corresponding number of certificates by 31 May of the following year.

S.I. No. 539/2024 - European Communities (Carbon Border Adjustment Mechanism) Regulations 2024

Ireland has recently introduced domestic regulations in respect of CBAM. On 18 October 2024, the Minister for the Environment, Climate and Communications, published S.I. No. 539/2024 - European Communities (Carbon Border Adjustment Mechanism) Regulations 2024 (the “Irish Regulations”) in Iris Oifigiúil.[1] The Irish Regulations came into operation on 25 October 2024.

For the most part, the Irish Regulations closely align with the contents of the CBAM Regulation and Transitional CBAM Regulation. However there are some additional items in the Irish Regulations which should be considered. Some notable provisions include:

• The Irish Regulations provide that from 1 January 2026, the Irish Revenue Commissioners shall not allow the importation of CBAM goods by any person other than an ‘authorised CBAM declarant’. 
• There is a requirement for importers to register as an ‘authorised CBAM declarant’ for the purposes of the definitive CBAM regime.  Registration will be via the CBAM registry during 2025 to apply from 1 January 2026 (Regulation 18).
• The Irish Regulations define the Environmental Protection Agency (EPA) as the national competent authority for CBAM purposes (Regulation 3).
• Officers of the EPA can enter, inspect, search and seize premises, products and records, for the purposes of ensuring compliance with the Irish Regulations (Regulation 11(3))
• The EPA may review a CBAM declaration within 4 years from the year during which the CBAM declarations should have been submitted (Regulation 14).
• The EPA may issue directions to a person to comply with the Irish Regulations and failure to comply will be an offence (Regulation 19).
• Regulation 24 provides that those guilty of an offence under the Irish Regulations shall be liable:
  • on summary conviction, to a Class A fine or to imprisonment for a term not exceeding 12 months, or both, or
  • on conviction on indictment, to a fine not exceeding €500,000, or to imprisonment for a term not exceeding 3 years, or both.
• Regulation 25(1) provides that a penalty of €100 per tonne of carbon dioxide equivalent emissions shall be applicable in instances where an authorised CBAM declarant fails to surrender the number of CBAM certificates which correspond to the emissions embedded in goods imported in the preceding calendar year by 31 May.  This will apply in respect of imports from 1 July 2026. 
• Regulation 30(4) provides that the EPA shall impose an 'effective, proportionate and dissuasive penalty' where an importer or its indirect customs representative has either not taken the necessary steps to correct a CBAM Report or has failed to comply with the obligation to submit a CBAM Report during the transitional period.

The CBAM Regulation and the Irish Regulations will have a significant impact on the supply chains of importers of CBAM goods. This is an evolving area with both the European Commission and the EPA regularly publishing updates. We  will continue to closely monitor developments relating to CBAM at an Irish and at an EU level.

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Please get in touch with Dara Higgins or your usual Matheson contact, should you require further information in relation to the material referred to in this insight.