In the context of implementing the Carbon Border Adjustment Mechanism (CBAM) within the European Union, the steel industry faces numerous technical and methodological challenges in calculating and reporting greenhouse gas emissions associated with steel production. This detailed analysis aims to clarify the complexities and provide specific guidance to navigate these requirements efficiently.
Context and applicability of CBAM in steelmaking: CBAM is designed to ensure fair competition by pricing the carbon emissions of products imported into the EU at levels comparable to those produced domestically. This mechanism is particularly relevant for steelmaking, where intense carbon emissions are an intrinsic feature of production processes.
Methodology for calculating CBAM emissions: CBAM uses a structured methodology to assess emissions from facilities, different from other carbon accounting standards such as Product Carbon Footprinting (PCF) under the Greenhouse Gas Protocol. While PCF covers emissions from extraction to the end of production, CBAM focuses on static facility emissions and excludes certain categories of emissions, such as those related to transport and some machinery.
Differences between CBAM and other carbon accounting methods: A distinctive aspect of CBAM is the calculation of carbon intensity at the commodity code (NC) level, in contrast to product-level approaches used in other systems. This allows for calculating an average carbon intensity for products categorized under the same NC code, thereby facilitating more general and potentially simpler reporting for certain types of products.
Challenges of implementing CBAM in steelmaking: One of the main difficulties is the need to reconcile emission data generated according to the CBAM methodology with that obtained through other protocols. This may lead to the necessity of maintaining parallel sets of carbon accounting data, complicating administrative and reporting processes.
Experience of steel plants with CBAM: Primary material producers, such as raw steel or aluminum, have made significant progress in adapting to CBAM requirements, largely due to the compatibility of these requirements with national emission reporting systems. For these facilities, adjusting to CBAM often involves merely reconfiguring existing data to match specific CBAM requirements.
Strategies for compliance: Companies in the steel industry must follow four essential steps to comply with CBAM requirements:
1. Identify CBAM goods produced and the necessary precursors within the specific NC code production process.
2. Request and collect data on CBAM precursors from suppliers within the EU.
3. Obtain and manage information on annual energy and fuel consumption, information that is frequently accessible through financial departments.
4. Prepare and standardize a data template for communication with EU authorities and customers, thus ensuring transparency and data compliance.
Therefore, to efficiently navigate the complexities of CBAM, steel companies must develop robust competencies in emissions data management and collaborate closely with all actors in the supply chain. This process not only ensures compliance with EU regulations but also contributes to broader sustainability goals and reducing climate impact.