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Emissions data is about to get a lot more valuable — and a whole lot more complicated.
The European Union’s Carbon Border Adjustment Mechanism, more commonly known as CBAM is a tax on importers of steel, aluminum, iron, and hydrogen, among other commodities, based on their production emissions. And even before the tax itself comes into effect, CBAM’s reporting requirements are poised to make importing to the EU a slog.
The current reporting requirements under CBAM are relatively straightforward, requiring standing data that’s already required for customs declarations, such as commodity codes and importer locations, said van den Eijnde. The first quarterly report was originally due this week, but was pushed back a month due technical issues with the reporting system.
But as of the third quarter, reporting requirements will become very complex. At that point, van den Eijnde said, importers will need to provide “the actual embedded emission values of their manufacturers,” she said
“That expands the current data set of approximately 80 fields per transaction to over 250 fields per transaction,” she said, adding that those expanded fields are extremely detailed, and include things like the latitude and longitude of factories and exactly where those factories get their electricity. And they ask for emissions data not only of the factory itself, but also aggregated to a particular good, up to the first relevant precursor.
Later this year, things are going to get very complicated in terms of how many parties are involved, and in terms of the breadth of required data, van den Eijnde said: “The calculations don’t match up with anything we already know.”
That’s because CBAM’s scope includes only certain parts of scope 1, 2, and 3 emissions, which means companies can’t just copy and paste.That’s likely to require too much effort for suppliers to just hand over the newly-required data without an impact on costs. And that means that those outside of the EU that are able to compile the requisite information will have a new and potentially valuable product.
“There’s going to be a market,” van den Eijnde said. “What the value of that market is really depends on how individual contracts play out.”
If U.S. suppliers play their cards right, and can navigate the complex requirements of aggregated product data, there’s a “big opportunity” for them to pull ahead of current market leaders like India and China, she added.
Exactly how long that competitive edge could last is unclear, though. CBAM is “effectively taxing US emissions,” van den Eijnde said, which in the longer-term could push the U.S. towards its own carbon tax.