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 CBAM report.

(this blog is regularly updated – last update on 24/10/2024)

Tightened CBAM reporting obligations from Q3

The transitional period of the Carbon Border Adjustment Mechanism (CBAM) until 2026 requires comprehensive reporting obligations. Reporting declarants must report the embedded emissions of their imported CBAM goods every quarter.

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:

1. Until 31/7/2024 other methods and the default values provided by the EU Commission
2. 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
3. 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.

Clarifying communication by the EU Commission

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.

Additional instructions by national authorities

Overall, these implementation details still allow NCAs a wide scope of discretion. Additional instructions have now been communicated in the first countries.  Differing practical interpretations are already emerging.

DEHSt in Germany

In its newsletter from 2/8/2024, the German Emissions Trading Authority (DEHSt), as the responsible CBAM authority for importers in Germany, confirms the procedure communicated by the EU Commission. However, actual emissions are only to be reported for imports of goods from 1/8/2024 in accordance with the IR.

If these data are not available afterwards, DEHSt will make use of its discretionary powers when:

• Proof is added that all possible efforts have been undertaken to report actual emissions or
• Justification is given that all reasonable efforts have been made and that further steps to determine actual data would have required a disproportionate effort and
• There are no further inconsistencies in the report

It remains to be seen what is sufficient for these proofs or justifications. DEHSt emphasizes that it will consider the relevance of the embedded emissions associated with the reported imports.

AnEH in Austria

The Austrian finance authorities have already provided information on their approach in their CBAM newsletter from 30/7/2024. Here too, only actual emissions data from the suppliers are to be used for the reports from Q3 onwards.

However, the Office for National Emissions Trading (AnEH), as NCA in Austria, will refrain from imposing sanctions if suppliers fail to provide the required data after two attempts by the reporting declarants. A template for data requests was provided for documentation purposes.

DGEC in France

French CBAM authority, The Directorate General for Energy and Climate (DGEC) recognized the difficulty in collecting CBAM data in its announcement from 11/09/2024. The use of default values will be tolerated for Q3 and Q4 reports in 2024.

Moreover, their checks will focus on quarterly reports with embedded emissions of more than 100 tCO2eq. Smaller importers will still need to provide evidence of efforts made to obtain actual emissions data.

Climat in Belgium

The Belgian Climate Service updated its information on October 9, 2024 outlining how to proceed when actual data is not available.  They reserve the right to apply penalties when the justification provided conflicts with data shared in other reports and when the use of actual data is not improved over time.

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 in CBAM reports (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 Tim van der Kuip on Unsplash