The European Union has raised the bar in the fight against climate change by introducing the Carbon Border Adjustment Mechanism (CBAM), aimed at reducing carbon emissions linked to imports from outside the EU. However, for EU importers of goods subject to this levy, the challenge is just beginning. By September 30, 2024, they must submit the fourth carbon emissions report, this time using actual data obtained from their suppliers.
From Default Values to Real Data
In the first three-quarters of CBAM’s implementation, importers were allowed to use default values to report carbon emissions linked to imported goods. This approach provided a grace period, enabling companies to adjust to the new regulations without needing to gather precise data from suppliers. But the transition period is coming to an end, and the September 2024 report marks a crucial shift: from now on, only real data will be accepted.
This presents a major challenge, as many importers lack experience in obtaining and using this data. Real carbon emissions data must be collected directly from non-EU suppliers, requiring significant coordination and collaboration efforts. Moreover, establishing a reliable emissions monitoring system can take time, making early engagement with suppliers essential.
The Importance of Starting Early
EU importers cannot afford to delay. While the legislation allows the use of default values until the end of 2025, early preparation is key to avoiding delays and penalties. From 2026 onward, all CBAM reports will be based exclusively on real data, and delaying the implementation of this system could lead to significant costs.
A critical first step is initiating a continuous dialogue with suppliers. They must be ready to provide the necessary carbon emissions data for the products they export to the EU. These data need to comply with the standards set by the European Commission and be carefully verified to ensure they meet regulations.
Challenges in Data Collection
Collecting real emissions data can be a complex process. Differences between real emissions and previously used default values can be significant, directly affecting CBAM costs. There is also the risk that supplier data may not meet CBAM standards, potentially leading to penalties or the need for recalculations.
To prevent such issues, the European Commission has developed clear emissions monitoring methodologies that require a high level of expertise. Importers must be prepared to invest in training and developing internal capabilities to manage these complex requirements. Collaborating with external experts in emissions monitoring is also recommended to ensure accurate and compliant reporting.
Available Alternatives
Until suppliers can provide the necessary real data, two alternatives can be used for calculations: default values and regional averages. Default values offer a temporary solution, but they do not reflect the specific variations of each production country. In contrast, regional averages provide a clearer picture of real emissions and can be used to compare supplier data.
Ideally, companies should strive to obtain real data from their suppliers as quickly as possible to avoid the cost differences generated by using default values. These differences can have a significant impact on market competitiveness, especially as regulations become increasingly strict.
What’s Next?
Legislative acts detailing the final rules are expected in 2025, meaning importers need to closely follow the EU legislative process to adapt in time. This attention to detail is crucial, as from 2026, any deviation from the imposed standards will incur additional costs and penalties.
Therefore, importers should treat the current period as an opportunity to properly prepare. This involves not only collecting real data from suppliers but also developing a robust internal system for monitoring and reporting emissions. Thorough preparation during this transition phase will largely determine the success of companies in the post-2025 period when the rules become definitive.
Although the transition period still allows for temporary solutions, the long-term success of EU importers depends on their ability to quickly adapt to the new CBAM reporting requirements. With proper preparation and efficient collaboration with suppliers, companies can turn this challenge into an opportunity to optimize processes and comply with carbon emissions regulations.
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