Commercial Information Circular

24-hour hotline : 23 922 922

e-mail address : enquiry@tid.gov.hk

Ref. : S/F (C) to EIC 230/2/11

16 May 2023

Dear Sirs,

Commercial Information Circular No. 339/2023

European Union (EU)* : Carbon Border Adjustment Mechanism

The European Parliament and the Council of the EU have adopted Regulation (EU) 2023/956 which establishes the Carbon Border Adjustment Mechanism (CBAM) aiming to address the risk of carbon leakage by equalizing the price of carbon between domestic products and imports for achieving the EU's climate objectives. The Regulation was published on 16 May 2023 and is available at: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32023R0956.

2.In general, the CBAM will apply to goods listed in Annex I of the Regulation (i.e. cement, electricity, fertilisers, iron and steel, aluminium and hydrogen) originating in a third country, where those goods or processed products from those goods are imported into the EU. It will initially apply to (a) direct emissions of greenhouse gases from the time of production of goods until import into the EU; and (b) indirect emissions except for the goods listed in Annex II of the Regulation.

3.The CBAM will enter into force on 17 May 2023 and apply from 1 October 2023 in a transitional form. During the transitional period from 1 October 2023 until 31 December 2025, the obligations of importers in the EU are limited to the reporting obligations delivered on a quarterly basis. According to the EU, the CBAM shall apply in full from 1 January 2026, where importers as authorised CBAM declarants will be required to surrender CBAM certificates with price corresponding to the embedded emissions declared and verified. They may claim a reduction in the CBAM certificates to be surrendered corresponding to the carbon price already effectively paid in the country of origin for the declared embedded emissions.

4.Before the end of the transitional period, the European Commission will review the application of CBAM to assess the possibility to extend the application scope, accompanied by a timetable for the gradual inclusion of products by 2030. Delegated and implementing acts under CBAM will be adopted to lay down detailed conditions for the application of the CBAM, including calculation and verification of the embedded emissions as well as management of the sale and repurchase of CBAM certificates.

5.For enquiries concerning the content of this circular, please contact the undersigned at 2398 5684.

Yours faithfully,

(Miss Tracy MAK)
for Director-General of Trade and Industry

* The EU comprises of 27 member countries, namely, Austria, Belgium, Bulgaria, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden.