Mitigate Climate Change: It aims to reduce global greenhouse gas emissions and prevent carbon leakage by encouraging companies to maintain production within the EU's stringent climate standards.

Ensure Fair Competition: CBAM levels the playing field between EU industries and competitors from countries with less stringent environmental regulations by applying a carbon cost to imports.

Promote Global Climate Action: The mechanism incentivizes non-EU countries to adopt stronger climate policies by aligning the cost of carbon domestically and internationally.

Support EU Climate Goals: It's a strategic tool to help the EU achieve its target of reducing greenhouse gas emissions by at least 55% by 2030 and becoming climate-neutral by 2050.

Generate Climate Financing: Revenue from CBAM supports the EU budget, including funding for climate and environmental initiatives.

Transitional Period (2023-2025):

1. Registration and Initial Reporting: Importers need to register with their national authority and start reporting emissions data for their imports, focusing on administrative setup and data collection without financial transactions related to CBAM certificates. Financial penalties of 10 to 50 EUR/tCO2 will be posed for non-compliance.

2. Data Collection and Verification: Emphasis is on collecting detailed emissions data (direct and indirect) associated with imports. While 3rd party verifications won’t be required until 2026, a strict emission data quality timeline has been set up (see next section).

Transitional Period (2023-2025):

1. Comprehensive Reporting, Financial Compliance, and Certificate Management: Importers are required to fully report the carbon emissions of their imports, purchase CBAM certificates to cover these emissions, and then surrender the appropriate number of certificates annually. This integrates detailed reporting with financial obligations under the CBAM framework.

2. Verification and Adjustments for Carbon Costs: The emissions data must be verified by independent third parties to ensure accuracy. Importers can adjust the CBAM costs based on any carbon pricing applied in the product's country of origin to prevent double payment, ensuring equitable trade practices.

3. Operational Efficiency and Compliance: Importers are expected to leverage the experience and data from the transitional period to enhance their supply chains and operational processes for better environmental and financial efficiency.