CBAM is coming in October 2023: What does that mean for your company?

With the Carbon Border Adjustment Mechanism (CBAM), the EU is introducing a set of rules from October 2023 that will now force importers of various, key raw materials & intermediate products to act. This border adjustment mechanism provides for a reporting obligation for companies importing goods with a high CO2e footprint from non-EU countries as of the last quarter of 2023. The experts at Ventum Consulting will help you prepare for the new requirements in good time, minimize risks and achieve your emissions targets. This not only cushions you against the internal impact of the new regulation, but also gives you a sustainable competitive advantage.


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    What is CBAM?

    The Carbon Border Adjustment Mechanism (CBAM) is an instrument of EU climate policy. It aims to strike a balance between companies inside and outside the European Union as part of the European Green Deal by preventing so-called carbon leakage, i.e. the shifting of greenhouse gas emissions from the European Union to other countries. CBAM thus contributes to reducing emissions from the production of imported goods.

    In addition, the CBAM is intended to protect European companies from foreign competitors that have benefited from cheaper energy prices to date. European companies have already adapted to stricter environmental standards and are investing in technologies to make their production more climate-friendly.

    In the envisaged transition phase, all companies within the EU will be required to prepare a report – the so-called CBAM report – on the emissions of the affected imported goods from non-EU countries from October 2023. From 2027, certificates must be used to ensure that the greenhouse gas emissions generated and not yet offset in the country of origin are taxed subsequently by the importing company.

    Which product groups are affected by CBAM?

    The affected and thus high-emission product groups are – in pure as well as processed form:

    • Cement
    • Power
    • Fertilizer
    • Iron & steel, including pipes, sumps and structural parts such as bridge elements, piers, roofs, doors & windows.
    • Aluminum

    The total volume of commodity groups covered by CBAM regulations in Germany in 2022 was approximately 12.7 billion euros. It can be assumed that the value introduced for 2023 and beyond should at least remain stable in terms of economic growth. China (€2 billion), Turkey (€1.6 billion) and the Russian Federation (€1.25 billion) are exposed as affected importing nations, although the figures for Russia in particular are likely to change in the 2023 reporting year due to the sanctions.

    Which companies are affected by CBAM?

    Due to the product groups affected, almost the entire manufacturing and processing industry is affected. In contrast to the EU’s CSR Directive, CBAM’s reporting and subsequent compensation obligations apply to all companies, irrespective of their turnover and number of employees. Companies that do not process iron, steel or aluminum may also be affected if, for example, containers made of these materials are used in production that were previously imported from non-EU countries.

    For importers of fertilizers, the most energy-intensive basic materials are affected in each case; for imports of electricity, the focus is on a few companies that import energy from non-EU countries via pipelines or by road and rail.

    What does the CBAM mandatory reporting include?

    The reporting, which has to be sent quarterly, includes master data such as the name of the company, the CBAM account number (which is assigned by the relevant authorities after one-time registration), type & number of imported relevant goods, country of origin, (direct) emissions as well as the price of the CO2 offset in the country of origin. In the case of emissions, only those greenhouse gases relevant to CBAM are to be reported in each case.

    It is also relevant that emission values are released as quickly as possible by the responsible authorities in order to secure these also with regard to the payment obligations from 2027.

    What is the timeline for the implementation of CBAM and what needs to be done now?

    The first reporting to the competent authorities is to be sent in January 2024 for Q4/2023. This information must be updated again one month after the end of each quarter. In addition to this regular reporting, a declaration for the preceding calendar year will also be mandatory from 2027 onwards, in each case by May 31. This includes:

    • Total quantity of the imported type of goods in tons
    • Total gray emissions in metric tons of CO2e emissions per metric ton of each type of goods
    • Total number of CBAM allowances corresponding to total gray emissions that must be surrendered, after mitigation based on the CO2 price paid in a country of origin.

    If a company fails to comply with the reporting requirements or fails to comply with the regulations, the regulation states that “proportionate and dissuasive sanctions” are possible.

    Certificate trading and possible costs

    The transitional period of the regulation applies until 2027, during which adjustments to the regulatory framework in general but also to the product groups are possible. Beginning in 2027, companies are required to purchase CBAM allowances to offset non-balanced greenhouse gas emissions.

    The price of the certificates is based on the weekly average of the EU-ETS certificates already available for purchase. Each company must hold 80% of the required certificates at the end of each quarter. This is intended to encourage companies to gradually accumulate the required certificates over the course of a year. CBAM certificates are valid for two years at a time; surplus certificates can be returned by certain deadlines and will be refunded.

    How does my company become "Fit for CBAM?

    The first step for companies is to check whether and to what extent affected goods are imported from reportable countries. Ventum Consulting supports you in this task and provides you with a quick overview of the need for action and optimization potential. Together with you, we develop a customized approach based on this analysis and ensure that regulatory requirements are met.

    An exemplary project includes:

    • Identification of affected import goods, partners and product groups
    • Create a roadmap along the CBAM timeline to best prepare your organization for the changes ahead. This contains, among other things:
      • Impact analysis: overview of procedural adjustment requirements & financial implications from 2027 onwards
      • Implementation proposal for the automation of CBAM reporting
    • Start official reporting and ensure verification of own emissions data by relevant authorities (customs)

    How does Ventum Consulting make you "Fit for CBAM"?

    We offer you:

    • Quick overview of action requirements and optimization potentials
    • Implementation of reporting within your tool landscape or with the Ventum CBAM App for Celonis
    • Through our partnership with the Open Group Forum, you gain early access to the de facto standard of data modeling for emission values
    • Training of an artificial intelligence: Your specific import behavior will be trained together with the weekly price data for European emission allowances at an early stage in order to have a robust and trained model for the optimized procurement of allowances available in 2027.

    Our claim: With Fit for CBAM by Ventum, you not only cushion the internal impact of the new regulation, but your company also gains a sustainable competitive advantage.

    Contact us today so we can work together to get you Fit for CBAM in time.

    Our expert for you

    Johannes Keim

    Partner at Ventum Consulting and expert for sustainability issues

    Der Experte für CBAM bei Ventum Consulting


    Johannes Keim

    Partner at Ventum Consulting

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