Demystifying EU CBAM: Six pains and predictions

Published on May 29, 2024 — By Nick Ogilvie

The EU CBAM doesn’t have to be painful.

With CarbonChain’s self-serve CBAM hub, your business can securely collect and validate supplier data, generate XML declarations and educate your suppliers on emissions monitoring methodologies via our comprehensive CBAM Knowledge Hub.

Will the EU water down requirements for primary data? Will it simply cost too much for companies to comply? Recently publications and concerns cast doubt over the viability and implementation of aspects of the CBAM regulation. In light of this, CarbonChain’s Nick Ogilvie assesses some of the key claims…

Six months and two reporting deadlines have passed since the European Union’s Carbon Border Adjustment Mechanism (EU CBAM) came into force. Importers of key goods like steel, aluminum, and fertilizers have faced new challenges in data management, emissions tracking, and supplier engagement.

This is just the beginning. In 18 months, the full implementation of CBAM will put a price on reported carbon emissions, marking a new era of global commerce where carbon reporting becomes part of customs processes.

Let’s look at the validity of six common claims:

Claim 1: Using the reporting platform is simply too difficult and marred by errors

Verdict: These issues have been fixed and deadlines extended. The ICC letter highlighted the technical issues that blocked many companies from accessing the platform, such as validation errors and even data deletion.

However, the European Commission acted swiftly to amend these errors, published extensive information on known IT issues, and allowed affected importers to request over a month’s extension.

Claim 2: Accessing the CBAM Registry is too complex because of the decentralized process

Verdict: These processes are now streamlined and clear on National Competent Authority websites. Access to the CBAM reporting platform is granted by each Member State’s appointed NCA (National Competent Authority).

Claim 3: The administrative and cost burden is disproportionate for small companies

Verdict: This is a key challenge, with plausible solutions for the EU to consider. Small businesses trading low volumes of goods may find themselves within the scope of CBAM but without the infrastructure to handle the additional bureaucratic and cost burden.

Claim 4: Fines won’t be enforced and primary data won’t be required

Verdict: Despite talk of ‘leniency’, there’s currently no solid evidence that non-complying importers can entirely escape penalties. Key dates such as 31st July 2024 are crucial for compliance. Non-compliance could lead to fines.

Claim 5: Primary data calculations are too challenging

Verdict: The CBAM methodology for emissions calculations is comparatively clear and straightforward. The perceived difficulty lies in measuring emissions at installations, especially as CBAM’s methodology differs from globally accepted carbon accounting standards.

Claim 6: Collecting supplier data is impractical and can be blocked by confidentiality concerns

Verdict: This is a genuine challenge in certain markets, but there are steps importers can take to limit friction in their data collection. CBAM compliance requires an unprecedented scale of supplier engagement, which can be managed through proper tools.