Agreed between the European Parliament and Council last December (2022), CBAM looks to put a fair price on carbon emitted during the production of imported goods, including hydrogen.

Read more: EU agreement on carbon pricing of imported goods, including hydrogen

The newly adopted implementing regulation details the transitional reporting obligations for EU importers of CBAM goods, as well as the transitional methodology for calculating embedded emissions released during their production process.

For the production of hydrogen and its derivatives, the guidance says reporting should take into account the Renewable Energy Directive (RED), which recently had two delegated acts adopted, laying out criteria for electrolyser electricity supply.

Read more: European Commission formally adopts renewable hydrogen definition legislation

Under one of the acts, hydrogen producers must comply with temporal and geographical correlation requirements for hydrogen to be branded as ‘renewable,’ setting criteria for hourly renewable energy matching and a requirement for electrolysers to be located within the same ‘bidding zone’ as renewable energy assets.

Additionally, the act sets a requirement for renewable energy assets used for renewable hydrogen production to be new and unsubsidised.

Read more: The impact of Europe’s renewable hydrogen complexity

During the transition phase of CBAM, traders will only have to report the emissions embedded in imports subject to the mechanism without paying any financial adjustment, allowing time for businesses to prepare for the full implementation at the start of 2026.

Coming as one of the EU’s central pillars of its Fit for 55 agenda, the EU says CBAM is hoped to with carbon leakage occurring from EU-based companies moving carbon-intensive products abroad to take advantage of lower standards.