Transform CBAM into Competitive Advantage

During the transitional phase, CBAM applies to imports of goods from the following sectors:

1. Cement (cement clinkers, white Portland cement, other Portland cement, aluminous cement, and other hydraulic cements)
2. Electricity
3. Fertiliser (nitric acid and sulphonitric acids)
4. Iron and steel (various iron and steel products)
5. Aluminium (unwrought aluminium and various aluminium products)
6. Chemicals (hydrogen)
   

CBAM applies to goods imported from any country outside of the EU that doesn’t have an equivalent carbon pricing system. However, it does not apply to goods originating from Iceland, Liechtenstein, Norway, and Switzerland. Some specific territories are also exempt, including Büsingen, Heligoland, Livigno, Ceuta, and Melilla.

Emissions under CBAM are calculated based on the embedded emissions of the imported goods. This refers to the greenhouse gases emitted during the entire production process, including both direct and indirect emissions.

• Direct emissions come directly from the production process itself.
• Indirect emissions come from the generation of electricity consumed during the production process.

There are two methodologies for determining embedded emissions:

Measurement-based methodology: This involves directly measuring emissions from the production process.

Calculation-based methodology: This involves calculating emissions based on the amount and type of materials and fuels used in the production process, along with relevant emission factors.

During the CBAM transitional phase, importers can use default values provided by the EU to determine the embedded emissions of imported goods. These default values represent the average emission intensity of goods produced in different countries. Importers are encouraged to transition towards providing actual emissions data over time.

The “bubble approach” allows operators to define one joint production process for monitoring and reporting embedded emissions when multiple CBAM goods are produced within the same installation. This simplifies the monitoring process and reduces administrative burden. This approach can be used for goods in the iron and steel sector and the aluminium sector.

Importers are required to submit CBAM declarations to their national authorities, detailing the embedded emissions of their imported goods. The declaration must include information such as:

• Description of the goods
• Combined Nomenclature (CN) code
• Quantity of goods imported
• Embedded emissions of the goods
• Country of origin
  

CBAM complements the EU ETS by ensuring that imports of carbon-intensive goods face a similar carbon price as goods produced within the EU. This helps create a level playing field and prevents carbon leakage.