Transitional Period: October 2023 to December 2025
Why this period matters
The transitional phase (1 October 2023 to 31 December 2025) was a critical learning window for CBAM. Importers were required to report embedded emissions but did not yet have to purchase and surrender CBAM certificates. Understanding what was expected during this phase, and how it differed from the definitive period, is foundational for any compliance professional.
What Was the Transitional Period?
CBAM entered application on 1 October 2023, but not in its full financial form. The regulation's authors recognised that businesses, customs authorities, and national competent authorities (NCAs) all needed time to adapt to a genuinely novel type of trade instrument. The solution was a two-year transitional phase during which the obligation was limited to reporting, not payment.
Under Article 32 of Regulation (EU) 2023/956, importers of CBAM goods were required to submit quarterly CBAM reports to the CBAM Transitional Registry, covering the greenhouse gas emissions embedded in their imports. Crucially, no CBAM certificates had to be purchased or surrendered during this window. The financial obligations of the definitive regime did not apply.
Analogy: A rehearsal before opening night
Think of the transitional period as a full-scale rehearsal. The performers (importers) had to go through every motion of the real show: gathering data, calculating embedded emissions, and submitting reports on time. But no tickets were sold and no financial consequences followed a stumble. The purpose was to surface problems, correct methodologies, and build competence before the definitive period's financial stakes kicked in on 1 January 2026.
Reporting Obligations During the Transitional Phase
The first reporting period ran from 1 October 2023 to 31 December 2023, with reports due by 31 January 2024. Thereafter, reports covered each calendar quarter and were due within one month of the quarter's end.
Each CBAM transitional report had to include:
- The total quantity of each type of CBAM good imported, expressed in megawatt-hours (for electricity) or tonnes (for all other goods)
- The country of origin of each import
- The actual embedded direct and indirect emissions per tonne of goods (where available)
- Any carbon price paid in the country of production, if applicable
Three Reporting Pathways for Embedded Emissions
A key flexibility provision during the transitional period was that importers could choose among three methodologies for calculating embedded emissions. This flexibility was explicitly intended to ease the burden on companies that could not yet obtain actual data from their non-EU suppliers.
| Pathway | Description | Available Until |
|---|---|---|
| EU Method | Full reporting using the methodology in Annex III of the CBAM Implementing Regulation, based on actual installation-level data from the third-country producer | Throughout transitional period |
| Equivalent Method | Reporting based on a method deemed equivalent by the Commission, including national MRV systems of certain third countries (three sub-options) | Throughout transitional period |
| Default Values | Reporting using Commission-published default reference values, which represent worst-case emission intensities for each sector | 31 July 2024 only |
The default values pathway was intentionally time-limited. The Commission published a set of reference values derived from available data on emission intensities in each sector and country. These were conservative (i.e., higher than actual emissions in most cases), designed to create an incentive for importers to obtain real data from their suppliers rather than rely on defaults indefinitely.
Example: A steel importer during the transitional period
A Spanish company importing hot-rolled coil from a Turkish steel mill had to submit its first CBAM report by 31 January 2024 covering Q4 2023. If the Turkish mill could provide verified production data (fuel consumption, process emissions per tonne of steel), the importer could use the EU Method. If the Turkish mill could not provide that data by Q1 2024, the importer could use the EU default values published by the Commission but only until 31 July 2024. From Q3 2024 onwards, the importer needed to use either actual data or an equivalent method.
Penalties for Non-Reporting
Although no certificates had to be purchased, non-compliance with reporting obligations during the transitional period was not consequence-free. Article 36 of the CBAM Regulation empowered national competent authorities to impose penalties on importers who failed to submit required reports or submitted materially incorrect data.
Penalties could range from €10 to €50 per tonne of CO₂ equivalent for each tonne of unreported or incorrectly reported emissions. This range was designed to be dissuasive without being disproportionate, given that no financial CBAM liability was triggered during the transitional phase.
The Learning Purpose: What the EU Was Collecting
The transitional period served a strategic data-gathering function for the European Commission. The quarterly reports generated a large dataset on the actual carbon intensity of goods entering EU markets from each country and sector. This dataset would inform two key elements of the definitive regime:
- Calibration of default values for the definitive period, replacing the conservative transitional defaults with more refined benchmarks
- Assessment of third-country carbon pricing systems, helping the Commission determine which countries' carbon prices should be deductible under Article 9
The Implementing Regulation (EU) 2023/1773 provided a correction mechanism. Importers could submit corrected reports within a specified window if they discovered errors in previously submitted data. This was important because suppliers often took time to compile accurate production data, meaning initial reports sometimes relied on estimates that needed subsequent revision.
The national competent authority in the importer's country of establishment was responsible for receiving, reviewing, and where necessary, initiating enforcement action in respect of transitional reports. This division of responsibility between the centralised CBAM Transitional Registry (managed by the Commission) and national-level enforcement was a deliberate design feature intended to leverage existing customs authority capacity.
Key Takeaways
- 1The transitional period ran from 1 October 2023 to 31 December 2025 and required emissions reporting only - no certificate purchases were required
- 2Importers filed quarterly CBAM reports covering quantity, country of origin, embedded emissions, and any carbon price paid in the country of production
- 3Three reporting pathways were available: the EU Method, an equivalent method, or default reference values (defaults limited to July 2024)
- 4Penalties of €10-€50 per tonne CO₂e could be applied for non-reporting or materially incorrect reports
- 5The Commission used transitional reports to gather data that would refine default values and inform deduction rules for the definitive period