CBAM is here.
Are you ready?

CBAM certificates (mandatory in 2026) will be as high as €100 - €200 per tonne of CO2. Penalties will range from €10 to €50 per tonne of CO2 not being reported.

CBAM declarant status refers to becoming an "authorized CBAM declarant." That status will be required to import goods covered by CBAM into the EU starting on January 1, 2026. The application can be submitted from December 31, 2024. The EU government might withhold authorized CBAM declarant status for any serious violation of the CBAM regulation, including inaccurate reporting.

Importers of CBAM goods must report the following information to authorities during the transitional period (October 2023 - December 2025):

• Total quantity of each type of CBAM goods imported, measured in megawatt-hours for electricity and in tonnes for other goods
• Total embedded emissions (direct and indirect) in the imported goods
• Country of origin of the imported goods
• Production methods used
• Identification number of the mill (for metal goods)
• Whether exact or default values were used for calculating emissions
• Any carbon price already paid in the country of origin for the embedded emissions
• Details on the operators/installations where the CBAM goods were produced (mandatory after June 30, 2024)
• For each aggregated goods category or CN code:
  • Direct and indirect specific embedded emissions of each good
  • Information on data quality and methods used for determining embedded emissions
• If default values were used, a short description of why
• Details of carbon price due and product and corresponding emissions coverage

Note: The first CBAM report is due by January 31, 2024, covering imports from Q4 2023. Reports must be submitted quarterly during the transitional period and are submitted through the CBAM Transitional Registry managed by the European Commission. Importers can request a 30-day extension for submitting the first report.

While the purchasing of CBAM certificates is not required during the transitional period, importers must set up systems to collect and report emissions data accurately for when full implementation begins in 2026.

It is advisable to first review contracts and any other commercial documentation with suppliers to precisely define the responsibilities and costs of compliance with the regulations.

Then start by:

• Keeping data requests simple and focused.
• Providing clear guidance on what data is needed and how it will be used.
• Being prepared to offer support and resources to suppliers.
• Aiming for continuous improvement in data quality.

The EU Commission has developed a CBAM communication template that importers can use to request information from suppliers.

Consider working with third-party advisors to establish a strategy. It might include starting with qualitative (versus quantitative) assessments among a subset of suppliers to refine your approach; using spend-based calculations; trying technology platforms to streamline data collection; and referring to product life-cycle assessments.

As a business partner to your customer and the "Tier 1" supplier, you are responsible for all CBAM information. The CO2 emissions embedded in imported goods must reflect the full manufacturing process of those goods. Therefore, suppliers of goods produced using precursors must include the embedded emissions of all precursors used in the production process.

While you may not be the manufacturer, you are still responsible for the accuracy of the emissions data reported. This means you should implement processes to verify the information provided by your suppliers.

You'll need to work on improving transparency in your supply chain to trace back to the original manufacturers or production facilities of the CBAM goods you import.

Remember, while the full financial obligations of CBAM don't start until 2026, the reporting requirements are already in effect. It's crucial to start preparing now to ensure you can meet these obligations.

There is no choice. The timely and accurate receipt of data from suppliers is essential. Since July 31, 2024, operators have been obliged to provide actual data on the declarant's/importer’s request.

In the event that you are challenged, make sure to document all efforts you make to obtain data from suppliers. Keep records of communications and any challenges faced in collecting information.

With non-cooperative suppliers, consider finding replacement suppliers who can provide the necessary CBAM data and might be better equipped to provide future emissions information.

Consultants can help you navigate CBAM requirements regarding suppliers and can use specialized software and trained personnel to get the information you need.

You must provide accurate data if you intend to maintain the relationship because your customer will, in turn, have to declare total embedded emissions in their products. Your contribution is an essential piece of that puzzle.

Consider the business implications. EU importers are likely to prioritize suppliers who can provide accurate CBAM data. If you don’t provide that data, it will impact your competitiveness.

Seek assistance if needed. Consider engaging consultants who can help navigate CBAM requirements and help you overcome data collection challenges.

Prepare for the long-term. CBAM reporting is an ongoing requirement, so investing in systems for emissions data collection and reporting will be a part of doing business in the EU. CBAM data collection should be integrated into your broader sustainability and carbon accounting efforts.