In what ways does your firm benefit from the Carbon Border Adjustment Mechanism (CBAM)?

 Functioning as a Carbon Border Adjustment Mechanism in Agile Advisors, Companies will only report on the embedded emissions of their imported items during the transitional phase. Companies that either fail to file a CBAM report or file one improperly or incompletely will face penalties. Penalties for unreported embedded emissions in CO2 range from 10 to 50 EUR per tonne1.Companies will also have to buy so-called CBAM certifications to cover the embedded emissions of the imported items in just two years, beginning in January 2026. The EU ETS pricing will dictate the certificates' worth. Stated differently, a carbon "tax" on imported goods will be imposed at the border to guarantee that the cost of importing high-carbon goods is equivalent to manufacturing them within the EU.

 

As a CBAM in Agile Advisors, the exporting company's decarbonization activities may be reflected in this carbon price, but it could also have been paid to non-EU cap and trade programs. To calculate the price importers will have to pay for embedded emissions, the EU is anticipated to provide more detailed regulations regarding how carbon prices paid elsewhere will be considered. This is intended to encourage decarbonization initiatives that will result in lower mandatory CBAM payments for both EU purchasers and non-EU sellers of imported goods. Finding out whether the company's products are subject to CBAM reporting is a crucial first step in initiating a CBAM reporting and management procedure.

As one of the leading CBAM regulations, by adhering to the EU's guidelines, businesses can ascertain which emissions resulting from the production process they must take into account and calculate the data requirements necessary to meet the reporting obligations. In reality, the importer is required to obtain emissions information pertaining to its imported CBAM goods from the relevant supplier. The EU has created a comprehensive framework for data gathering that outlines the information suppliers must gather and submit and how to determine the emissions associated with its products.  Up to Q2 2024, importers are permitted to report using the "default values" provided by the EU; following that, they must be able to report using "real emissions information" from each provider.

To help you as Carbon Border Adjustment Mechanism, motivating suppliers to collect emissions data and reply to requests for emissions data presents a difficulty because doing so calls for resources and expertise on the part of the suppliers. Although the reporting procedure may appear onerous, importers will benefit from having a thorough grasp of the CO2 emissions throughout their supply chain. This critical information will support decarbonization activities in the importer's supply chain and help comply with the CBAM reporting requirements (including climate-related CSRD reporting). An EU initiative known as the Carbon Border Adjustment Mechanism, or CBAM, aims to control the emissions of products imported into the EU and, therefore, lessen carbon leakage.

In our opinion as CBAM, as of January of this year, businesses importing goods that fall under any of the six first categories covered by the CBAM will have to report the emissions related to those goods every quarter. Are you seeking additional knowledge and practical assistance in the field of CBAM? From preliminary scoping and interpretation of reporting requirements to turning climate change into a competitive advantage, Gaia can assist at every stage of the process.