The European Union has formally informed the World Trade Organization that it has notified the setting up of the Carbon Border Adjustment Mechanism (CBAM), which seeks to put a price on emissions during the manufacture of products imported into the EU.

In a communication to the WTO’s Committee on Trade and Environment, the EU said that the regulation will come into force from October 1, 2023, with the exception of some of its articles which will take effect on December 31, 2024, and January 1, 2026.

The EU will adopt an implementing Act concerning the information to be reported for the transactional period of CBAM from October 1, 2023, to December 31, 2025.

From mid-2023, the EU Commission will launch an information campaign featuring online seminars, physical events, distribution of guidance documents, and direct assistance aimed at assisting third-country operators and importers to the EU in performing all new obligations required by the CBAM regulation and its secondary legislation.

India, China, and many other countries are worried about the impact of CBAM on their exports to the EU. The regulation, seen as a protectionist measure, has got these countries worried that it will make their products uncompetitive.

Both India and China have raised concerns over the EU’s move to the WTO. While India presented a paper on the issue at the WTO’s Committee on Trade and Environment, China introduced a proposal to deepen multilateral discussions on the trade aspects and implications of environmental measures like the carbon regulation that have wide ramifications.

India is also seeking to convince the EU to honor its carbon certificates to be issued after the Carbon Credit Trading Scheme (CCTS) comes into force. The government has sought feedback from stakeholders on the draft CCTS, which was proposed as part of the Energy Conservation (Amendment) Bill, 2022.

The CBAM will initially apply to products and commodities like cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen that are exported to the EU.

Currently, the regulation will apply to direct carbon emissions. But the EU has proposed that CBAM should in the future apply to indirect emissions of greenhouse gases arising from the generation of electricity used to produce the goods to which the regulation applies.