In connection with the presentation of the national budget (Statsbudsjettet) earlier in October 2024, the Norwegian government has announced that Norway will join the EU’s Carbon Border Adjustment Mechanism (CBAM). This marks a significant move toward aligning Norway’s climate and trade policies with the European Union.
But what exactly is CBAM, and why is this development crucial for Norwegian businesses?
What is CBAM?
CBAM was introduced to address the issue of carbon leakage which occurs when companies move their production to non-EU / non-EFTA countries with less stringent carbon regulations to avoid the costs of emissions. Through carbon pricing under the EU Emissions Trading System (ETS), European producers face higher costs that could leave them at a disadvantage compared to producers in countries without such systems.
To combat this, CBAM ensures that imported goods are subject to the same CO2 pricing as those produced within the EU. Starting January 1, 2026, products imported into the EU—and soon into Norway—will carry an additional charge linked to their carbon emissions, levelling the playing field and reducing the risk of carbon leakage. This carbon levy applies to specific industries, with further extensions planned.
CBAM, alongside the EU’s Anti-Deforestation Regulation (EUDR), is one of the key EU regulations aimed at promoting sustainability and reducing greenhouse gas emissions.
The UK is also developing its own version of a Carbon Border Adjustment Mechanism (CBAM) as part of its post-Brexit climate policies. While it is still in the consultation phase, the UK’s CBAM is expected to align with the EU’s system, ensuring British businesses remain competitive in global trade and adhere to decarbonisation efforts.
Which industries are affected by CBAM?
Currently, the following goods are in the scope of CBAM:
- Iron and steel
- Cement
- Fertilisers
- Aluminium
- Electricity
- Hydrogen
For businesses in these industries, this means new obligations around reporting emissions and potentially increased costs on imports from countries without stringent carbon pricing mechanisms.
The road ahead for Norwegian businesses
CBAM represents both a challenge and an opportunity. The mechanism aims to drive global emissions reductions by holding producers accountable for their carbon footprint, but it also creates a new layer of complexity for businesses involved in international trade.
Although the Norwegian government has announced its intention to join the EU’s CBAM, it is still uncertain when exactly Norway will join fully. The government has outlined that preparations will begin in 2025 to facilitate CBAM implementation, but many details are still to be worked out. (Source: regjeringen.no)
NHO (The Confederation of Norwegian Enterprise) has raised concerns about the lack of a transitional period for Norwegian businesses. Since Norwegian importers did not participate in the CBAM trial period, they may be at a competitive disadvantage once the system is fully implemented in 2026. NHO also calls for a trial period for Norwegian companies before the full implementation of CBAM. As a new system with numerous requirements, businesses need time to adapt. (Source: NHO.no)
In conclusion, while CBAM may initially seem like a hurdle, Norway’s participation in the same system as the EU is ultimately a positive development. It allows Norwegian businesses to align with both European and global sustainability goals, ensuring they stay competitive in an eco-conscious market. By joining the EU in reducing carbon emissions, Norway strengthens its position in international trade. Early preparation will be key to ensuring a smooth transition and avoiding potential disruptions, setting up Norwegian companies for long-term success in a low-carbon economy.
How can Emma E-Doc help you manage CBAM compliance?
Our clear recommendation for Norwegian businesses now affected by CBAM regulations—as well as EU and UK companies impacted by CBAM—is to start preparing now.
Understanding what CBAM means for your business and implementing the necessary processes is key. This might involve hiring new staff, training employees, reviewing your supply chain, and perhaps investing in tools that can help you streamline your CBAM reporting.
Emma E-Doc enables fast and accurate identification of country of origin and tariff numbers, customs data essential for CBAM reporting.
- With Emma E-Doc, you can quickly identify declarations that include specific countries of origin and tariff numbers impacted by CBAM, making it easier to gather the required data
- Emma E-Doc also offers customisable alerts and dashboards for specific tariff numbers, countries of origin, or other customs data related to CBAM as well as other regulations related to your business
- An example of the E-Doc CBAM dashboard can be seen in the screenshot below (later on, s similar dashboards for EUdR , EU’s Deforestation Regulation will also be made available)
While CBAM regulations themselves can’t be eased, using the right tools can make managing them much simpler!