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Carbon Border Adjustment Mechanism (CBAM)

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Guidance from Experts, Building Capabilities, and Ensuring Assurance for CBAM Compliance

As part of the EU Green Deal – G55 Commitment, the European Union is implementing policies, including the Carbon Border Adjustment Mechanism (CBAM), impacting international businesses. EU importers must submit precursor emission data from non-EU countries which includes Indian manufacturers and exporters. At present major six sectors have been covered under CBAM, which will be extended to other sectors as well by 2030.

Indian installations are required to calculate embedded emissions to continue their business. The transition phase, starting from Oct 2023 to Dec 2025, precedes the introduction of emission taxation in Jan 2026, potentially accompanied by penalties.

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Unlocking Competitive Advantage through CBAM Compliance

Securing Market Access and Reputation

Enhancing Stakeholder Confidence

Maximizing Cost Savings and Efficiency

Driving Sustainable Growth

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What is CBAM, and how does it work?

CBAM is the Carbon Border Adjustment Mechanism, a policy tool for the calculation of tax on EU importer for the embedded emissions of their goods. It requires, declaring their embedded emission from their suppliers too if imported from non-EU countries for defined goods quarterly. To keep up with competition and business continuation Non-EU countries exporters are required to submit their installations data with the same defined timeline as well.  

The  EU has defined a timeline of 1 January 2026 as the start of the Taxation of emissions for the importers. Till 31 December 2025 is defined as a transition period when the importer is obliged to submit a quarterly report on imported goods embedded emissions.

CBAM has defined and given a definition of their term specific embedded emission, which included emission from the precursor of the producer as well. This direct and indirect emission definition given under CBAM is marginally different than traditional Carbon footprint intensity and product carbon footprint. If calculated values of embedded emissions are not available from the supply chain,  default values from EU-published documents have to be taken.

Though its taxation phase will start from Jan 2026, the transition phase is important as well to get the exporter's organization and inventory ready as per CBAM regulations. Once producer computes their existing embedded emission within the transition period, they get the opportunity to reduce them and get ready to compete when the Carbon levy starts. From July 2024 use of default value will be prohibited for EU importers.

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Steps to comply with CBAM

  • Assessing if products fall within the scope of CBAM regulation
  • Reviewing the applicability of CBAM to processed goods resulting from covered items
  • Collecting and analyzing data on embedded emissions
  • Considering the establishment of a dedicated CBAM organization for efficient information management
  • Ensuring timely and accurate delivery of relevant information in the required format to EU importers
  • Prioritizing the accuracy of CBAM-related information sharing with EU importers during the transitional period
  • Aim to minimize carbon levy impact (if applicable) post-transition, while adhering to the above steps

Adhering to CBAM standards enhances the competitiveness of Indian products in international markets by avoiding potential tariffs and meeting evolving consumer preferences for sustainable goods. An exporter’s CBAM journey starts with identifying CBAM goods within the installation followed by defining the installation Boundary, Collecting relevant energy and processing data from the right point of source and calculating with an established methodology. In addition to this implementation of monitoring methodology and declaring the emission in a given format makes it a complete loop.

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Who need to comply CBAM?

Any installations outside EU countries willing to export the defined goods need to comply with CBAM. The CBAM regulation currently is defined for imports of cement, iron and steel, aluminium, fertilizers, electricity and chemicals along with some identified precursors.

The CBAM is likely to cover additional sectors and products and is expected to cover all sectors included in the European Union Emissions Trading Scheme (EU ETS) by 2030.

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Key Definitions

Direct emissions’ refer to emissions from the production processes of goods, including emissions from the production of heating and cooling consumed during the production processes, regardless of the location of the production of the heating and cooling.

‘Indirect emissions’ means emissions from the production of electricity, which is consumed during the production processes of goods, regardless of the location of the production of the consumed electricity.

‘Embedded emissions’ mean emissions released during the production of goods, including the embedded emissions of the relevant precursor materials consumed in the production process.

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How DQS can help for CBAM Reporting?

Addressing the gap analysis

  • Comparing the company's current practices vis-à-vis CBAM requirements and identifying potential gaps
  • Proposing strategies to streamline requisite procedures for easing CBAM requirements fulfilment, including the creation of a CBAM organisation within the entity

Monitoring, measuring and reporting

  • Developing a framework for monitoring, measuring and reporting of embedded GHG emissions
  • Capacity development with respect to all aspects of emissions estimation, calculations, reporting and decarbonization

Decarbonisation roadmap

  • Support in evaluating the impact on the supply chain and leveraging technology to ensure overall efficiency
  • Developing a feasible, phase-wise decarbonization roadmap

Assurance of GHG data

  • Validating the accuracy and integrity of the data submitted to EU customers
  • Ensuring that the reporting format complies with CBAM requirements.
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What are industries supposed to do now?

  • Installation Boundaries: It's crucial for industries to clearly delineate the physical and operational boundaries of their installations. This ensures accurate identification of the facilities covered under CBAM regulations.
  • Production Processes: Identifying and documenting all production processes within the defined boundaries helps in assessing the emissions associated with each activity accurately.
  • Production Routes: Understanding the different pathways or methods used in production is essential for evaluating emissions across various stages of the manufacturing process.
  • Direct Emissions (Adjusted for Heat Flows): Industries need to monitor emissions released directly from their installations, adjusted for any heat flows that may impact accuracy. This involves assessing the quantity and nature of emissions.
  • Calculation-based Approach or Measurement: Emissions monitoring can be conducted through either calculated estimates or direct measurement methods, depending on feasibility and accuracy.
  • Indirect Emissions: Monitoring indirect emissions associated with activities outside the installation, such as electricity consumption, is essential for a comprehensive emissions profile.
  • Precursors: Identifying and monitoring precursor substances that lead to the formation of pollutants or emissions is crucial for understanding the complete emissions picture.
  • Quantities: Accurately measuring the quantities of emissions generated ensures reliable data for reporting and analysis.
  • Conversion Factors: Applying standardized conversion factors helps in converting raw data into consistent units for comparability and consistency.
  • Embedded Emission Values (Precursors): Quantifying emissions resulting from precursor substances used in production processes is necessary for a comprehensive emissions assessment.
  • Carbon Price Paid in the Jurisdiction: Tracking and reporting the carbon price paid in the regulatory jurisdiction is essential for compliance with carbon pricing requirements and regulatory obligations.
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How much does CBAM certification cost?

The cost of CBAM services depends on several factors, like the size of your company, the number of sites, the number of products whose embedded emission you have to calculate, the measurement and monitoring system maturity and the complexity etc. All these factors can influence the duration of the assurance as well as the price. Thus, the costs for CBAM services cannot be presented as a lump sum. We will be happy to make you an individual offer for your company, organization or agency.

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Why should you choose DQS India?

  • Expertise in CBAM Compliance: Our team possesses extensive knowledge and expertise in Carbon Border Adjustment Mechanism (CBAM) regulations, ensuring accurate reporting and compliance with EU requirements.
  • Tailored Solutions: We offer customized services designed to meet the specific needs of your organization, providing comprehensive support throughout the CBAM reporting process.
  • Assurance and Accuracy: With our meticulous approach to data verification, you can trust that the GHG data submitted to EU customers will be accurate and compliant with CBAM standards.
  • Compliance Assurance: By choosing our services, you can rest assured that your reporting format will meet CBAM requirements, minimizing the risk of non-compliance and associated penalties.
  • Trusted Partner: As a trusted partner, we prioritize transparency, reliability, and client satisfaction, ensuring that your organization receives the support and guidance needed to navigate the complexities of CBAM reporting effectively.
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