CBAM’s first reporting period wrapped up: 4 lessons from EcoAct

The EU’s Carbon Border Adjustment Mechanism (CBAM) has made waves globally since its first reporting period closed on January 31^st. Amidst this regulatory shift, EcoAct has guided regulated companies and their partners, headquartered in France, Germany, the United States, China and Japan, helping them navigate and adapt to the evolving policy landscape.

CBAM, set to impose a price to embedded emissions of carbon-intensive goods imported into the EU, aims to encourage importers to decarbonise their supply chains and incentivise would-be suppliers to green their operations. The real financial impact won’t hit until 2026, but importers are already grappling with quarterly emissions reporting, a challenge set to escalate by late 2024 as data collection requirements ramp up.

Discover the key lessons learned from CBAM’s first reporting period:

1. Start the reporting process early

Technical glitches hit the CBAM Registry hard at the end of January, leaving many companies struggling to upload data or even log in. Beyond this challenge (for which the EU has allowed a 30-day extension), the registry has specific requirements that, if not met, prevent submission and may take considerable time to correct. As a result, companies are recommended to allocate sufficient time for report completion and third-party reviews.

2. Clearly define internal processes for better accountability

Larger companies need to collect and aggregate import data consistently across teams and geographies. How do you record customs codes and goods descriptions internally? Do you track the entire supply chain to reliably record the production location of each material? How do you report net and gross weights? Beyond data collection, who is ultimately in charge of reporting? Does each branch have a separate CBAM declarant, or is there a single representative for the entire company? Establishing these finer details will help streamline the reporting process.

3. Prioritise supplier engagement for streamlined data collection

Until July 31^st, firms have the option to complete their CBAM submissions using “default values” provided by the EU. This means firms can largely comply by reporting the mass of imported goods, along with some other high-level information.  However, after July, the EU will require the collection of complex, site-specific information from suppliers (and even their upstream suppliers), including details about energy consumption, fuel efficiency, and material-specific production processes.

Companies need to start preparing their partners to meet these demands well in advance of the October reporting deadline. Additionally, they ought to evaluate the option of prioritising suppliers with advanced data collection processes, as they may be better equipped to provide the requested information accurately.  EcoAct has already begun collaborating with non-EU manufacturers, guiding them in upgrading their procedures to position themselves as more attractive suppliers for EU importers.

4. Prepare for impact and assess costs and risks

After completing quarterly submissions, firms should bear in mind that reported emissions will eventually come with costs, and that the EU plans to expand CBAM to more products before 2030. To prepare for the ensuing financial risk, companies need to estimate these costs, which will be pegged to developments in the EU Emissions Trading Scheme and the level of any carbon prices affecting their international suppliers. Even firms not regulated by CBAM should take note, as any regulated suppliers can be expected to pass significant costs through to their customers.

With CBAM’s first reporting period done, what next?

The EU is bound to draw valuable insights from the first reporting period, prompting policy modifications in the months to come. As CBAM advances, EcoAct can support companies at all stages of this journey. We can offer regulatory insights from our Research and Innovation Team, data collection support from our life-cycle assessment and supplier engagement specialists, and cost and risk quantification using the EcoAct Carbon and Energy Pricing Tool.