Day: November 4, 2023

CBAM: 4 key pillars of preparation

Introduction

The European Union’s Carbon Border Adjustment Mechanism (CBAM) represents a bold step towards climate-conscious trade and production. Its objectives aim not only to reduce carbon leakage but also to establish a fair global carbon market. However, as a complex unilateral administrative framework, the CBAM places significant reporting requirements on the industries it covers, presenting both challenges and opportunities.

These obligations demand precision and attention to detail, as the data will not only determine the payable CBAM Certificates, but also form the basis of accurate carbon accounting and carbon tax exposure measurements. A key component of this process is the ability to precisely calculate direct and indirect emissions since they both are directly related to expenditures. This requirement underscores the importance of sophisticated and reliable measurement methodologies and, in some cases, may require investment in new integral and automated technology. Equally crucial is the obligation to report on carbon prices paid abroad, a task that necessitates a keen understanding of foreign jurisdictions’ carbon pricing systems.