The Carbon Border Adjustment Mechanism (CBAM) is a crucial regulation within the European Union (EU) which came into effect last year. It aims to prevent the relocation of production processes and their CO2 emissions to non-EU countries, a phenomenon known as carbon leakage. CBAM not only regulates European companies but also supports them by increasing transparency on emissions-heavy imports and requiring compensation.
Under CBAM, importers are required to declare the emissions associated with products they bring into the EU. Subsequently, they must offset these emissions by purchasing CBAM emission certificates. Initially, CBAM focuses on direct emissions from products such as steel, iron, aluminium, fertilisers, cement, and electricity. These industries were selected due to their significant contribution to total EU emissions. In the future, CBAM will extend to cover more products and indirect emissions.
As CBAM approaches implementation, businesses need to prepare and plan how to comply with these new regulations. Given that CBAM will reshape international trade, EU-based businesses and those importing goods subject to CBAM rules need to remain informed and ready. The EU issue guidance which can be found here and in late February, the EU also updated the Q&A Sheet, which can also be found here.
Challenges, Opportunities, and Solutions for CBAM Implementation
The implementation of CBAM presents several challenges for companies, including data collection from suppliers, emission calculation, and reporting. Particularly for businesses utilising transport services for customs clearance, gathering data poses additional hurdles.
To meet the requirements of CBAM, companies need to enhance their capabilities, with a focus on data exchange, emission calculation, and carbon certificate management. While CBAM presents challenges, it also offers new opportunities. Preparation is crucial for adapting to these changes and leveraging the benefits CBAM provides.
Whilst this is not a customs regulation, it will impact traders both in EU and Non-EU countries operating in the sectors included on the CBAM regulation. The initial stage started with Cement, fertilisers, iron & steel, electricity, aluminium, and hydrogen sectors.
If you are an UK exporter selling goods to EU companies under the above sectors and above €150 euros, or currently acting as an ‘importer of record’ into the EU, then you will need to ensure you do not only understand what CBAM all is about but also help your partners complete the required reporting templates which must provide information on carbon emissions during production.
The first deadline for submitting the first CBAM quarterly report was 31st Jan 2024 covering the period of 1st Oct till 31st Dec 2023. However, according to Financial Times, the EU struggled seeing submission of reports across the board on theirs first deadline. Although to a certain extend expected to see some teething problems and the EU provided an extended deadline, businesses who fail to report from Mid-July, will face a fine of €50 per tonne of carbon emissions.
The new CBAM has come also with a fair share of confusions and uncertainty and general fear this is only adding to already burdensome red tape and increasing costs of trading cross- borders.
GM Chamber at the forefront of export and import support.
At Greater Manchester Chamber of Commerce, we are committed in supporting traders navigate through new regulations and we are pleased to announce, we are working closer with partners to supporting your successful CBAM implementation journey and fostering sustainable solutions for a greener future. Our tailored CBAM preparation services are designed to assist companies in planning for future needs and integrating these tools into their operational landscape. Start your journey now and you will be ahead of the game.
If you have any questions or require assistance with CBAM, don't hesitate to reach out. We're here to guide you through the process and help you unlock the full potential of CBAM. Interested in CBAM training and compliance support? Email us at exportbritain@gmchamber.co.uk to learn more and take the first step towards CBAM readiness.
We are also keen to hear from businesses in Greater Manchester and beyond who are experiencing issues with this new regulation. We encourage you to complete our Quarterly Economic Survey, and help us understand how your business is doing in both domestic and international markets. It only takes 2 min of your time, and your feedback is crucial to help us influence future policies and support for traders like you.