Southwest Environmental Limited

Carbon Border Adjustment Mechanism (CBAM)

CBAM is an EU carbon import tax. Why? If we consider 2 like for like products one manufactured in the UK, and the other in China, the Chinese product will likely have a higher carbon footprint. CBAM aims to level the playing field applying a tax to the imported Chinese product in order offset the additional carbon being imported to the EU.

"CBAM is the EU’s landmark tool to put a fair price on the greenhouse gases (GHG) emitted during the production of certain GHG-intensive goods, including iron and steel, entering the EU. It will ensure that the EU’s climate objectives are not undermined and encourage cleaner industrial production in non-EU countries."

Now win the vein of " "If you can't explain it to a six year old, then you don't understand it yourself" [Albert Einstein] we will try to explain the rational in layman's English.

Is CBAM bad for UK Exports?

No not really, in fact its quite helpful. If we compare the carbon intensity of say energy:

1. NZ - 0.80 kg CO2e per kWh
2. UK - 0.21 kg CO2e per kWh
3. EU - 0.21 kg CO2e per kWh (Rough Average)
4. CN - 0.55 kg CO2e per kWh
5. AU - 0.60 kg CO2e per kWh
6. SA - 0.90 kg CO2e per kWh

Now energy is not the whole story, but it is reflected in all products to some extent and very much so in heavy industries such as cement and steel manufacture. So in answer to this sub-chapters question: Is CBAM bad for UK Exports? No its isn't because the UK compares well against the big manufacturers of the world such as China and India.

What are the Rules for CBAM?

In order to meet the requirements of CBAM the following stages must be me:

1. Importers must accurately determine the greenhouse gas emissions released during the production of their goods. This involves considering both direct emissions (from the production process itself) and indirect emissions (from electricity used in production).
2. A registry will be established to track CBAM certificates and ensure compliance.

How to Submit a CBAM Report

The submission for the CBAM Report is carried out through the registry, and you will need a European presence in order to sign up for use of the portal. So for example an economic operator in Ireland would be able to register, but not one from the UK. You would need tax information for a company that was registered in the UK.