What is CBAM – Carbon Border Adjustment Mechanism
- December 18, 2023
- Posted by: BiconAdmin
- Category: CBAM
What is CBAM (Carbon Border Adjustment Mechanism)?
CBAM Services. Bicon Consultants advise companies on meeting CBAM compliances, with quarterly submissions. We go above and beyond CBAM compliances by advising companies on reducing their energy consumption through energy audit services.
Understanding CBAM
Carbon Boarder Adjustment Mechanism (CBAM) is a landmark tool to put a fair price on carbon emissions from energy intensive industries by the European Union. Essentially EU’s new carbon tax. The aim is to prevent carbon leakage by subjecting the import of certain groups of products from non-EU countries to a carbon levy linked to the carbon price payable under the EU emission trading system (ETS) when the same goods are produced within the EU.
CBAM Compliance Implementation
The CBAMs transitional period started on 1st October 2023 and ends on 31st January 2024, during this phase the importers of CBAM goods are required to submit quarterly reports with the following content:
- Quantities in which CBAM goods imported during the quarter, specified per country of origin per production site where the goods are produced.
- The embedded direct (if applicable, indirect) greenhouse gas emissions thereof;
- Carbon price due to country of origin (if applicable).
In case any challenges are faced by the reporting declarant for obtaining emissions data during the transactional period, they have some alternative options for reporting emissions values, the period ends on 31st December 2024, the corresponding monitoring and reporting methods are below:
- A carbon pricing scheme where the production site is located
- A compulsory emission monitoring scheme where the production site is located
- An emission monitoring scheme at the production site which can include verification by an accredited verifier
The full scope of the CBAM regulation will come into force on 1st January 2026. From this date onwards the importers will need to obtain authorization to import CBAM goods, declare every year the quantity of CBAM goods imported into the EU in the preceding year and their embedded greenhouse gas emissions and surrender CBAM certificates to cover the declared emissions.
CBAM Road Map
Indian Scenario & The Sectors Covered Under CBAM
Currently the followings sectors are covered under first phase of CBAM:
- Iron & Steel
- Fertilizers
- Aluminum
- Cement
- Electricity
- Hydrogen
When it comes to India’s export market, it will have an adverse impact on sectors like iron & steel and aluminium products to the EU. These sectors will face higher scrutiny under the CBAM mechanism. The major exports to the EU are iron ore & steel will face a significant threat due to the carbon ranging from 19.8% & 52.7 %. When it comes to the carbon intensity of Indian products it is significantly higher than that of the EU and many other countries because coal dominates the overall energy consumption. The proportion of coal-fired power in India is close to 75%, which is much higher than EU. The EU has coal-fired power is approximately 15% and the global average is around 36%. The direct and indirect emissions from the production process of Iron & steel and aluminium sectors will become a major concern for the Indian exporter’s market.
The competitiveness of the Indian market with other countries, India doesn’t have any domestic carbon pricing scheme up to date but implementing decarbonization principle can help the along with nations domestic policies like national steel policy, production linked incentive will help to increase production along with reduction in emissions. By adding clean technologies and financing mechanisms will make India’s production sector more carbon efficient.
Products under various sectors, falling under CBAM regulations include:
Iron & Steel Sector
Agglomerated iron ores and concentrates, other than roasted iron pyrites |
Pig iron and spiegeleisen in pigs, blocks or other primary forms |
Some products under 7205 (Granules and powders, of pig iron, spiegeleisen, iron, or steel) may be covered here |
Ferro-manganese (FeMn) |
Ferro-chromium (FeCr) |
Ferro-nickel (FeNi) |
Ferrous products obtained by direct reduction of iron ore and other spongy ferrous products |
Iron and non-alloy steel in ingots or other primary forms (excluding iron of heading 7203) |
Semi-finished products of iron or non-alloy steel |
Stainless steel in ingots or other primary forms; semi-finished products of stainless steel |
Other alloy steel in ingots or other primary forms; semi-finished products of other alloy steel |
Granules and powders, of pig iron, spiegeleisen, iron or steel (if not covered under category pig iron) |
Flat-rolled products of iron or nonalloy steel, of a width of 600 mm or more, hot-rolled, not clad, plated or coated |
Flat-rolled products of iron or non-alloy steel, of a width of 600 mm or more, cold-rolled (cold-reduced), not clad, plated or coated |
Flat-rolled products of iron or non-alloy steel, of a width of 600 mm or more, clad, plated or coated |
Flat-rolled products of iron or non-alloy steel, of a width of less than 600 mm, not clad, plated or coated |
Flat-rolled products of iron or non-alloy steel, of a width of less than 600 mm, clad, plated or coated |
Bars and rods, hot-rolled, in irregularly wound coils, of iron or non-alloy steel |
Other bars and rods of iron or non-alloy steel, not further worked than forged, hot-rolled, hot-drawn or hot-extruded, but including those twisted after rolling |
Other bars and rods of iron or non-alloy steel |
Angles, shapes and sections of iron or non-alloy steel |
Wire of iron or non-alloy steel |
Flat-rolled products of stainless steel, of a width of 600 mm or more |
Flat-rolled products of stainless steel, of a width of less than 600 mm |
Bars and rods, hot-rolled, in irregularly wound coils, of stainless steel |
Other bars and rods of stainless steel; angles, shapes and sections of stainless steel |
Wire of stainless steel |
Flat-rolled products of other alloy steel, of a width of 600 mm or more |
Flat-rolled products of other alloy steel, of a width of less than 600 mm |
Bars and rods, hot-rolled, in irregularly wound coils, of other alloy steel |
Other bars and rods of other alloy steel; angles, shapes and sections, of other alloy steel; hollow drill bars and rods, of alloy or non-alloy steel |
Wire of other alloy steel |
Sheet piling of iron or steel, whether or not drilled, punched or made from assembled elements; welded angles, shapes and sections, of iron or steel |
Railway or tramway track construction material of iron or steel, the following: rails, check-rails and rack rails, switch blades, crossing frogs, point rods and other crossing pieces, sleepers (cross-ties), fish- plates, chairs, chair wedges, sole plates (base plates), rail clips, bedplates, ties and other material specialised for jointing or fixing rails |
Tubes, pipes and hollow profiles, of cast iron |
Tubes, pipes and hollow profiles, seamless, of iron (other than cast iron) or steel |
Other tubes and pipes (for example, welded, riveted or similarly closed), having circular cross-sections, the external diameter of which exceeds 406,4 mm, of iron or steel |
Other tubes, pipes and hollow profiles (for example, open seam or welded, riveted or similarly closed), of iron or steel |
Tube or pipe fittings (for example, couplings, elbows, sleeves), of iron or steel |
Structures (excluding prefabricated buildings of heading 9406) and parts of structures (for example, bridges and bridge-sections, lock- gates, towers, lattice masts, roofs, roofing frameworks, doors and windows and their frames and thresholds for doors, shutters, balustrades, pillars and columns), of iron or steel; plates, rods, angles, shapes, sections, tubes and the like, prepared for use in structures, of iron or steel |
Reservoirs, tanks, vats and similar containers for any material (other than compressed or liquefied gas), of iron or steel, of a capacity exceeding 300 l, whether or not lined or heat-insulated, but not fitted with mechanical or thermal equipment |
Tanks, casks, drums, cans, boxes and similar containers, for any material (other than compressed or liquefied gas), of iron or steel, of a capacity not exceeding 300 l, whether or not lined or heat-insulated, but not fitted with mechanical or thermal equipment |
Containers for compressed or liquefied gas, of iron or steel |
Screws, bolts, nuts, coach screws, screw hooks, rivets, cotters, cotter pins, washers (including spring washers) and similar articles, of iron or steel |
Other articles of iron or steel |
Aluminium Sector
Aluminium powders and flakes |
Aluminium bars, rods and profiles |
Aluminium wire |
Aluminium plates, sheets and strip, of a thickness exceeding 0,2 mm |
Aluminium foil (whether or not printed or backed with paper, paper-board, plastics or similar backing materials) of a thickness (excluding any backing) not exceeding 0,2 mm |
Aluminium tubes and pipes |
Aluminium tube or pipe fittings (for example, couplings, elbows, sleeves) |
Aluminium structures (excluding prefabricated buildings of heading 9406) and parts of structures (for example, bridges and bridge-sections, towers, lattice masts, roofs, roofing frameworks, doors and windows and their frames and thresholds for doors, balustrades, pillars and columns); aluminium plates, rods, profiles, tubes and the like, prepared for use in structures |
Aluminium reservoirs, tanks, vats and similar containers, for any material (other than compressed or liquefied gas), of a capacity exceeding 300 litres, whether or not lined or heat-insulated, but not fitted with mechanical or thermal equipment |
Aluminium casks, drums, cans, boxes and similar containers (including rigid or collapsible tubular containers), for any material (other than compressed or liquefied gas), of a capacity not exceeding 300 litres, whether or not lined or heat-insulated, but not fitted with mechanical or thermal equipment |
Aluminium containers for compressed or liquefied gas |
Stranded wire, cables, plaited bands and the like, of aluminium, not electrically insulated |
Other articles of aluminium |
Cement Sector
Other kaolinic clays |
Cement clinkers |
White Portland cement, whether or not artificially coloured |
Other Portland cement |
Other hydraulic cements |
Aluminous cement |
Fertilizer Sector
Nitric acid; sulphonitric acids |
Urea, whether or not in aqueous solution |
Ammonia, anhydrous or in aqueous solution |
Nitrates of potassium |
Mineral or chemical fertilizers, nitrogenous – Except Urea |
Mineral or chemical fertilizers containing two or three of the fertilizing elements nitrogen, phosphorus, and potassium; other fertilizers Except – Mineral or chemical fertilizers containing the two fertilizing elements phosphorus and potassium3. |