The reporting obligations in the EU’s Carbon Border Adjustment are being tightened. EU and national authorities have now communicated their implementation approaches. Actual emissions data must be requested from suppliers of CBAM goods. If these are not available, proof must be provided. Emission values will be set to 0 in the Registry.
(last update on October 10, 2024)
Reporting from October 2023
The introduction of the EU Carbon Border Adjustment Mechanism (CBAM) requires detailed rules for the implementation of this new – the first in the world – instrument for pricing embedded CO2 emissions in imported goods.
From 2026, an import levy must be paid via the purchase of CBAM certificates. In the transitional period until then, affected companies will only be subject to reporting obligations.
With importers of goods made of iron and steel, aluminium, cement, fertilizers, electricity and hydrogen, a large number of companies of various sizes and industries are subject to these obligations.
From October 1, 2023, the embedded emissions in imported goods should be reported to the EU on a quarterly basis. High administrative burdens are expected for implementation.
The reporting obligations must be fulfilled by the importing companies themselves. Only in the case of indirect customs representation can these duties be taken over by a customs office.
Required data
The quarterly reports must be submitted one month after the end of the quarter in question via an electronic CBAM transitional registry. The following information is required:
- The quantity of imported goods identified by the code numbers,
- Combined Nomenclature (CN) must be identified and broken down
- Direct emissions from the production of the goods, including information on plant-specific emissions and manufacturing processes
- Indirect emissions from the electricity consumed during production, including plant-specific electricity consumption and sources as well as emission factors
- (If applicable) CO2 prices already paid in the country of origin minus refunds and compensation payments
Especially for importers who import a wide variety of CBAM goods from different suppliers that buy from a number of production installations, this results in very extensive report.
Permitted emission values
While simplified rules for determining emissions based on default values were initially in place, the reporting obligations will be tightened from Q3 2024. §4 of the Implementing Regulation (IR) defines the following rules:
- Until 31/7/2024 other methods and the default values provided by the EU Commission
- Until 31/12/2024 CBAM-comparable methods from (i) carbon pricing scheme, (ii) compulsory emissions monitoring system at the location or (iii) emissions monitoring system at the installation
- CBAM method by (i) calculation based on actual activity data, or (ii) continuous measurement of actual emissions concentrations
According to §5, estimated values, including default values, can be used for up to 20% of the total emissions of complex CBAM goods (e.g., iron & steel and aluminum products). Beyond that, actual emission data is required from the operators of the installations where the CBAM goods are produced.
Annex III of the IR also stipulates that default values can be used if the installation operators are unable to determine the actual data using the above-mentioned methods and no other method is available to close data gaps. In this case, a short explanation shall be added.
Clarified communication by EU
The EU Commission has now communicated further implementation details in an update to its Questions and Answers on 9/8/2024 (updated 24/10/2024). These clarifications see question 75) confirm that actual emissions must be reported from July 1, 2024.
Report preparation
The reporting declarants must make every possible effort to obtain actual emissions data from their suppliers or the manufacturers of the CBAM goods.
The efforts should be based on both the declarant’s own capacities and the ability of the installation operators to determine such data. If actual emissions data cannot be obtained, the efforts made must be documented.
Report submission
In these cases, a note is to be added in the comments field of the respective emissions entry when submitting the quarterly report. Supporting documents of the unsuccessful efforts should be added to the report.
As per the updated CBAM registry manual from 8/10/2024, emission values are then set to 0. However, submitted reports are then considered incomplete or incorrect according to §13 of the IR. Without corrective measures, sanctions as specified in §16 would be due.
Report review
Penalties are enforced by the national competent authorities (NCA). They are responsible for assessing whether the necessary steps have been taken to collect the actual emissions data.
The Commission lists the following considerations when deciding on sanctions:
- Means and resources used for data collection
- Their adequacy in relation to the declarant’s economic size and imported amount of CBAM goods
- Repeated actions and follow-ups with suppliers or manufacturers
- Time period concerned and their duration.
Data queries and checks
These latest communications confirm the need for actual emissions data for CBAM reports from Q3 onwards. If this data is not available, reporting declarants – especially smaller importers can benefit from flexibility at the discretion of their NCAs.
All importers should, however, undertake the necessary efforts to obtain actual emissions data. At least, they should request the needed data from their suppliers or manufacturers of CBAM goods.
If these queries remain unanswered or data are not available, the undertaken efforts should be documented as proof for the report (and subsequent audits).
However, even if emissions data are received from suppliers or manufacturers of CBAM goods, it is essential to check whether they meet the CBAM requirements (especially with regard to methodology and reporting period).
Non-EU installation operators without a previous emission monitoring are unlikely to have actual emission data for CBAM purposes. In such cases, it remains unclear how to proceed with estimated values, which are considered to be equal to default values in the CBAM regulation.
Sources and further information:
- BMF Austria: CBAM emissions calculation
- DEHSt: Carbon Border Adjustment Mechanism
- European Commission: Q&A on Carbon Border Adjustment Mechanism
- EU: Implementing Regulation on reporting obligations
- EU: Regulation establishing a carbon border adjustment mechanism
Photo by Tyler Casey on Unsplash
