In 2023, Europe imported more than 2,500 billion euros. This represents 20% of the EU's greenhouse gas emissions and this share is increasing every year!
To limit emissions linked to imports, the European Commission has just introduced, with Regulation (EU) 2023/956 of 1 October 2023, the European Commission has just introduced, with Regulation (EU) 2023/956 of 1 October 2023, a carbon border adjustment mechanism (MACF), also called the “European carbon tax” or Carbon Border Adjustment Mechanism (CBAM).
The establishment of the MACF is a world first! This mechanism is at the heart of the European Green Deal, whose ambitious objective is to achieve carbon neutrality by 2050. Concretely, the MACF aims to gradually introduce a tax on imports of products with a high carbon content, based on the CO2 emitted during their production.
But how does this mechanism work? What is it for? When will it apply? Is your business affected? What are the new obligations arising from this? How do you fill out your MACF report? We go through all these questions in this article.
1. What is the Carbon Border Adjustment Mechanism (CBAM)?
The MACF is an instrument, a mechanism that the European Union has set up to implement its Green Deal and fight against global warming.
It is an environmental measure. This is why in France, the competent authority on this issue is the Directorate-General for Energy and Climate (DGEC) of the Ministry of Energy Transition.
Concretely, with the implementation of this mechanism, importers of goods (or their indirect customs representatives) will have to declare the direct and indirect greenhouse gas (GHG) emissions integrated into their imports, and pay a tax on these imports when crossing the EU border.
2. What are the objectives pursued by the MACF?
The main objective remains the same as that pursued by the European Green Deal: fight against global warming and achieve carbon neutrality by 2050.
More precisely, this mechanism allows the EU to extend its environmental standards to companies outside the European Union exporting on its territory.
Today, within the EU, European businesses are subject to a number of environmental standards. Among these, the establishment in 2005 of a European carbon market providing for an emissions trading system: the ETS mechanism. With this system, greenhouse gas emission quotas are allocated to companies. If these quotas are exceeded and therefore when they pollute, companies must pay an additional cost (buy additional CO2 quotas), the amount of which is defined by the market.
But, this ETS mechanism only applies at the European level! And it is clear that some industries relocate (or are tempted to relocate) their production that emits high GHG emissions to regions where environmental legislation is less strict: this is the phenomenon of carbon leak. As a result, companies that produce in Europe are put in competition with companies outside the EU that are not subject to the ETS mechanism and that do not always pay a price on the greenhouse gas emissions they generate. This creates a de facto disadvantage for European businesses.
It is therefore to overcome this imbalance, and to prevent companies from moving their industries outside the EU for the sole purpose of evading more demanding European standards, that the EU has set up the MACF.
This system, which works a bit like “mirror quotas” of the ETS system, will calculate the emissions intrinsic to imported products, which also makes it possible to encourage lower-carbon industrial production and to reduce the carbon footprint linked to EU imports. Through this mechanism, European businesses will therefore be encouraged to buy their goods from companies that are more environmentally friendly.
3. Which companies are affected by the MACF?
There are several cumulative conditions for a company to be subject to the MACF: one related to the type of imported product, the others related to the nature of the flow concerned and its amount.
- The company imports into the customs territory of the EU, the continental shelf or the EEZ, a product concerned and listed by the MACF
Initially, in 2026, the MACF will only apply to a certain number of products or product families:
- steel (except some ferro-alloys)
- aluminum
- nitrogen fertilizers
- cement
- hydrogen
- electricity
The customs classifications of the goods concerned are listed inannex 1 of regulation 2023/956. In addition, the imported goods must not come from a country listed in Annex 3 of Regulation 2023/956. At the end of the transition period in 2026, it is not excluded that this list will be extended to other goods, such as certain chemical products. Overall, the products concerned are those with a high risk of carbon leak.
- The flows concerned by the MACF must have certain characteristics:
- It must be an “import” in the customs sense of the term, i.e. the “release into free circulation of the goods” mentioned above
AND
- that the import has an intrinsic value greater than €150 per shipment.
In all other cases, if you do not meet these cumulative conditions, you are not subject to MACF!
In practice, some companies will have to conduct Life Cycle Assessments (LCA) on their products to check whether or not they meet the MACF taxation criteria. To know everything about LCA, Read our dedicated article on the Sami blog.
4. How does the MACF work?
As we have seen, before the introduction of the MACF, companies could import goods from outside the EU at no additional cost, the production of which accelerates global warming.
With the MACF, importers of certain families of goods on EU territory whose production is not subject to a carbon price (or at a low price) will have to pay an additional cost by entering the European market when crossing the border.
The MACF instrument requires importers of goods that come from a non-EU state to buy emission certificates based on the carbon price, certificates that they would have had to pay if the goods had been produced in the EU!
Certificates must be purchased from the national authorities. The price of these certificates will be indexed to the prices of the European carbon emissions trading system (ETS or ETS), which currently concerns only companies based in Europe.
As for the number of these certificates to be purchased, this will depend for each company on the CO2 emissions generated during the production of imported goods.
To make it possible to calculate the greenhouse gas emissions generated, it is intended that exporters from third countries will transmit the data to European importers. If this is not the case, importers can use default values for each sector concerned.
5. What is the timeline for implementing the MACF?
The gradual implementation of the mechanism started as early as 1 October 2023. The MACF will be applied in phases:
- A transitional period from October 1, 2023 to December 31, 2025
- Full implementation of the MACF from January 2026: by that date, all carbon tax provisions must be fully implemented
6. What obligations are incumbent on companies concerned by the MACF?
In accordance with Regulation (EU) 2023/956, which introduces the MACF, it is the Implementing Regulation (EU) 2023/1773, which establishes the rules that are the responsibility of the companies concerned by the MACF.
The EU has planned a transition period until December 2025 during which obligations are lighter for businesses. From 2026, the obligations provided for by the MACF will be applicable in full.
6.1 Obligations for EU businesses during the transition period (Oct 2023 → Dec 2025)
During the transition period, the obligations arising from the importation of goods subject to the MACF are limited.
- The quarterly reporting requirement: formalize a MACF report that summarizes certain data related to your imports
This is the requirement for the importing company to submit and present a MACF report on a quarterly basis. This means that importers of goods (or their indirect customs representatives) will have to declare in a MACF report certain information related to imports made during a given quarter. The MACF report must be presented no later than one month after the end of the quarter concerned.
The information that must be declared concerns: the total quantity of each type of imported goods, the intrinsic direct and indirect greenhouse gas (GHG) emissions integrated into their imports (generated by these products), as well as any carbon price due for these emissions.
It is important to note that these reporting obligations apply both to direct GHG emissions (emissions related to the production process), but also to indirect GHG emissions: for example emissions related to electricity consumption during the production process.
=> During the transition period, importers must therefore only declare the carbon emissions of imported products without making payments. They will only start paying them from 2026 at the end of the transition period.
- The obligation to register in the MACF transitional register
The objective of the MACF transitional register set up by the European Commission is to help importing companies subject to the MACF to draw up and submit their MACF report.
This register will also allow for good communication and transmission of information between the European Commission, the companies concerned, the national customs authorities, etc.
Access and registration in the European register is done on this link. To be able to access it, you must check beforehand that you meet certain prerequisites: you have a Douane.gouv.fr account, your Douane.gouv.fr account is certified, you have the authorization to file a MACF register.
6.2 From 2026, several obligations are incumbent on companies concerned by the MACF
- Hold the status of an authorized MACF declarant before importing goods affected by the device (such as aluminum, steel, etc.)
- File a “MACF Declaration” or “MACF Report” by May 31 each year, summarizing import data from the previous calendar year.
- Acquire the MACF certificates necessary to cover the emissions generated by the products you will have to import during the following year.
- Maintain a minimum stock of MACF certificates at the end of each quarter.
7. How do I fill out my MACF report?
The European Commission has provided companies with a course including regulatory explanations as well as a tutorial to complete your report effectively.
The online training is available here: https://customs-taxation.learning.europa.eu/course/view.php?id=770§ion=8
All questions relating to the content of the report fall under the responsibility of the DGEC, the competent authority on the MACF, and not with Customs. For any question relating to the environmental objectives of this regulation or the filling out of reports, in particular on the calculation of the emissions incorporated in your imports, you can contact the Directorate-General for Energy and Climate (DGEC) at the address: quesions.MACF@developpement-durable.gouv.fr
8. What resources can help you?
To help you prepare for these new obligations, the European Commission and the Government have developed several documents that may be useful to you. Among them:
- How do you complete your MACF report?
- MACF infographic - Carbon Border Adjustment Mechanism
- File - Carbon Border Adjustment Mechanism (CBAM)
- FAQ from the European Commission relating to the MACF
CONCLUSION
The implementation of the MACF will result in a future reform of the emissions trading system (ETS). Until now, free quotas were granted for certain sectors under stress in order to avoid relocations. With the MACF, this phenomenon will be limited and free quotas are no longer necessary! This is why they will be gradually reduced from 2026 until their total elimination in 2034.
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