CBAM is currently operational. An instruction manual for businesses on how to comply

 

Being a Carbon Border Adjustment Mechanism provide Agile Advisors, a crucial policy tool, is designed to mitigate the risk of carbon leakage under the EU ETS. This scheme, the largest global carbon pricing initiative, is responsible for nearly 40% of the EU's emissions. The term' carbon leakage' refers to the scenario where domestic manufacturers, bound by stringent regulations, struggle to compete with overseas producers operating under less environmentally friendly but cheaper conditions. This policy is a significant step towards preventing businesses from relocating to nations with less stringent environmental regulations. If climate policy does not control carbon leakage, manufacturers producing high emissions may decide to relocate overseas. Instead of being reduced, emissions would be exported, and the home economy would suffer. Regulated enterprises under the EU ETS currently receive emission allowances free of charge, based on their emission intensity relative to a sectoral benchmark and their exposure to the risk of carbon leakage.

In our role as Carbon Border Adjustment Mechanism in Agile Advisors, this distribution of free allowances is gradually phased out until 2034. CBAM is taking steps to reduce the risk of carbon leakage for the EU industry, marking a significant shift in European climate policy. Starting in October 2023 and continuing until the end of 2025, CBAM only requires importers of specific products to report. These importers, or indirect customs representatives handling CBAM goods, are responsible for calculating and reporting the embedded emissions that occur during the production process of CBAM items and their precursors. This reporting must be done in accordance with specific regulations.2026 marks the beginning of CBAM's last phase. Importers are required to buy a corresponding number of CBAM certificates after that. The cost of emission allowances in the EU ETS, which is currently approximately 85 euros per ton of CO2e, is directly related to the cost of CBAM certificates and is predicted to fluctuate between 100 and 150 euros by 2030.

To help you as Carbon Border Adjustment Mechanism, the carbon price owed for domestic and imported commodities sold on the EU market is integrated via this system. In contrast to the free allocations system, CBAM encourages aggressive carbon pricing and overseas industrial decarbonization in addition to increasing EU ETS income (free allocations of emission allowances are phased out). Before importing CBAM goods into the EU, importers or indirect customs representatives must register as authorized CBAM declarants to fulfil their CBAM duties. Regulated companies must use the methods outlined below to determine the emissions embedded in imports for each calendar year. By May 31st of the following year, they must disclose the results through the CBAM declaration. The importers may also request in these statements a reduction in the number of CBAM certificates they must turn in once the country of origin has successfully paid its carbon price.

We believe as a Carbon Border Adjustment Mechanism, Third-party verifiers recognized by the EU ETS regulation are required to validate the data in the CBAM declarations. The CBAM registry, the platform where authorities get data on embedded emissions and where CBAM certificates are purchased, relinquished, and surplus certificates are resold to the authorities, must be accessible to importers. The requirement to turn in CBAM certifications is not fully enforced until 2034. It is optional to obtain CBAM certificates during the changeover period. Importers must turn in their CBAM certificates beginning with the definitive period in 2026. The amount of CBAM certificates that must be turned in rises directly to the EU ETS's phase-out of free allocations; starting in 2026, regulated businesses must turn in CBAM certificates representing 2.5% of their embedded emissions. The EU established comprehensive guidelines for embedded emissions calculations.

As an expert Carbon Border Adjustment Mechanism, declarants are often required to consider both direct emissions from the manufacturing process and indirect emissions from the energy generated during the production process. The CBAM Directive identifies several products (including those in the iron and steel industry) for which only direct emissions are to be considered. The manufacturing sites get EU reimbursement for increased power costs due to carbon pricing. Compliant entities may choose to use one of the following approaches to compute their direct emissions: the method based on calculations, in which production inputs and raw materials are mixed with calculation factors like emission factors or net calorific values. The measurement-based method calculates emissions by using ongoing measurements of flue gas flow and concentrations of greenhouse gases in flue gases.