2) What Is Regulation EU 2023/956?

Regulation (EU) 2023/956#

Regulation (EU) 2023/956 is the primary legislation establishing the Carbon Border Adjustment Mechanism. Published 16 May 2023, it entered into force 17 May 2023. The transitional period started 1 October 2023. The definitive period starts 1 January 2026.

This regulation is binding across all EU member states without needing national implementing legislation. It applies directly to importers, customs representatives, and operators of installations producing CBAM goods.

Why It Is a Regulation Not a Directive#

EU law comes in different forms. Regulations apply directly in all member states without national transposition. Directives require member states to achieve certain results through their own national laws.

CBAM needed uniform application. If each member state implemented CBAM differently through national law, imported goods would face different treatment depending on entry point. This would distort the single market and create opportunities for regulatory arbitrage.

Regulation (EU) 2023/956 ensures CBAM works identically whether you import through Rotterdam, Hamburg, or Piraeus. The same goods, from the same supplier, face the same carbon cost regardless of EU port of entry.

What the Regulation Establishes#

The regulation creates the legal framework for CBAM. It defines which goods are covered, who must comply, what obligations exist, how the certificate system works, and what penalties apply for non-compliance.

The regulation contains 36 articles organised into chapters covering scope, obligations, certificates, enforcement, and transitional provisions. Four annexes list covered goods, greenhouse gases, exempted countries, and calculation principles.

Key provisions include authorisation requirements for importers, certificate purchase and surrender obligations, links to EU ETS free allocation phase-out, and penalty frameworks. The regulation also mandates reporting and review by 2028 to assess effectiveness and potential expansion.

How Implementing Regulations Add Detail#

The regulation provides the framework. Implementing regulations adopted by the Commission fill in technical specifics.

Commission Implementing Regulation (EU) 2023/1773 sets detailed rules for the transitional period including reporting obligations, calculation methodologies, system boundaries by sector, and emission factors. This is what importers and operators have been following since October 2023.

Commission Implementing Regulation (EU) 2024/1620 establishes technical details of the CBAM Registry including account management, data submission, and information publication.

Commission Delegated Regulation (EU) 2025/2083 simplifies implementation by introducing the 50-tonne threshold, extending declaration deadlines, and adjusting system boundaries for certain products.

Further implementing regulations will be adopted before January 2026 to clarify definitive period procedures.

Relationship with EU ETS#

CBAM mirrors the EU ETS in scope and methodology. EU ETS established in 2005 puts a price on emissions from installations operating in the EU. CBAM extends this carbon pricing to imports.

System boundaries under CBAM match EU ETS monitoring boundaries. The emissions calculated for CBAM are the same emissions an EU installation would monitor under EU ETS. This ensures fair comparison between domestic production and imports.

Free allocation under EU ETS phases out from 2026 to 2034. As EU producers receive fewer free allowances and pay more for emissions, imports face equivalent costs through CBAM. By 2034, complete parity is achieved with no free allocations and full CBAM coverage.

Who Must Comply#

The regulation applies to importers of CBAM goods into the EU customs territory. If you lodge customs declarations for release of CBAM goods into free circulation, you are an importer under CBAM.

If you use an indirect customs representative, the regulation allows the representative to be the reporting declarant instead of you. This must be agreed between you and the representative.

Geographic scope covers imports from third countries. Goods from EEA/EFTA countries with linked carbon pricing (Iceland, Liechtenstein, Norway, Switzerland) are exempt.

During transitional period through 31 December 2025, reporting obligations apply but no financial obligations. From 1 January 2026, you must obtain authorisation as CBAM declarant, purchase certificates, and surrender certificates annually.

Enforcement Structure#

Each member state designates a competent authority to administer CBAM. These authorities approve declarant applications, verify declarations, and enforce compliance.

Penalties for unreported or incorrectly reported emissions range from €10-50 per tonne. Member states set specific penalty levels and procedures within that range. Additional penalties apply for other violations including importing without authorisation and failing to surrender certificates.

Appeals follow national procedures through each member state’s administrative courts.

What This Means#

Regulation (EU) 2023/956 establishes legal obligations for anyone importing CBAM goods or supplying to EU importers. Compliance is mandatory regardless of whether you understand requirements, have systems in place, or face data collection challenges.

The regulation shows what you must do. Understanding how it applies to your specific products, suppliers, and supply chains requires analysis beyond reading the legal text.

Companies need to determine which goods they import are covered, what their specific obligations are, how to obtain necessary data, and how to structure compliance processes. The regulation provides the legal framework but implementing that framework depends on individual circumstances.