The European Union’s Carbon Border Adjustment Mechanism (CBAM) is a new policy that requires importers to report on the carbon footprint of their goods. BBC assists in preparing for CBAM reporting, a critical process for businesses importing specific goods into the EU.
The European Union’s Carbon Border Adjustment Mechanism (CBAM) is a carbon pricing tool to put a fair price on the carbon emitted during the production of carbon-intensive goods entering the European Union (EU) and to encourage cleaner industrial production in non-EU countries.
Who Needs to Do CBAM Reporting?
The responsibility for CBAM reporting falls on businesses importing specific goods into the European Union (EU). Here’s a breakdown of the entities that must comply with CBAM regulations:
- EU Importers: Any company established within the EU that imports CBAM-listed goods must submit CBAM reports. This includes both direct importers and those utilising indirect customs representatives.
- Indirect Customs Representatives: Businesses acting on behalf of importers to clear goods through EU customs may be entrusted with CBAM reporting responsibilities. However, this requires their explicit agreement and using their own Economic Operators Registration and Identification (EORI) number during the import process.
CBAM-listed Goods
The current focus of CBAM is on specific carbon-intensive industries. Here’s a list of the product categories currently subject to CBAM reporting:
- Aluminium
- Cement
- Iron and Steel
- Electricity
- Fertilisers
- Hydrogen
CBAM is a dynamic policy, and the list of CBAM-listed goods may expand in the future. Businesses are highly encouraged to monitor official EU CBAM updates to stay current with any changes or additions to the regulations.
How to Fulfill the CBAM Requirements
Step 1: Identify Emission Sources
The foundation of a robust CBAM report lies in pinpointing the specific activities within the production lifecycle of your imported goods that generate greenhouse gas (GHG) emissions. This initial stage requires a thorough analysis of the production process, encompassing:
- Production Stage Breakdown: Decompose the manufacturing process into various stages, including raw material extraction, transportation, energy consumption during production, and waste disposal. Each stage likely contributes to your product’s overall carbon footprint.
Step 2: Collect Activity Data
For each identified emission source, meticulously gather the relevant activity data. This quantifiable data serves as the basis for calculating emissions and typically includes:
- Quantified Raw Material Usage: Track the exact amount of raw materials utilised in production. For instance, this could involve documenting the cargo of iron ore used for steel production.
- Energy Consumption Monitoring: Monitor the type and quantity of energy consumed during manufacturing. This may include data on megawatt-hours of electricity or cubic meters of natural gas.
- Production Output Record: Record the production output of the reporting period and document the total quantity of the CBAM goods imported to the EU.
Step 3: Identifying Suitable Emission Factors
Once you clearly understand your emissions sources and activity data, the next step involves acquiring emission factors. These factors act as conversion coefficients, meticulously translating the activity data (e.g., tons of steel produced) into the corresponding CO2 emissions generated.
Step 4: CBAM Report Writing
With the emissions data calculated using the chosen methodology, you can proceed to compile your CBAM report.
