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EU CBAM

Redshaw Advisors can help you get ahead on CBAM requirements and risk management. Our specialist consultants can inform you about this complex regulation's impact on your business, guide you through the requirements you need to fulfil, and help you craft a tailored risk-management strategy to stay ahead of the curve.

The EU CBAM poses an immediate and serious operational threat organisations that import goods covered under this regime into the EU.

Redshaw Advisors is committed to enhancing strategic decision-making ability by providing clear and up-to-date information on the CBAM legislation, direct and indirect cost forecasting, MRV (Measure Report and Verify) requirements and risk management recommendations for organisations exposed to the EU CBAM..

Why does it matter? 

The EU CBAM is a crucial component of the Fit For 55 packages, to combat carbon leakage. The CBAM achieves this by adjusting the embedded cost of direct and indirect emissions from importers into the EU. Initially, the package focuses on sectors such as iron and steel, aluminium, cement, fertiliser, electricity, hydrogen, chemical precursors, and specific downstream articles. Additional sectors like paper, plastics, organic chemicals/polymers, glass, and oil refining are likely to be added after the 2025 transitional period. The CBAM will cover around 750 individual products defined within customs commodity codes, eventually encompassing all products covered by the ETS without any materiality threshold.

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ARE YOU EXPOSED TO CBAM?
HERE IS HOW WE CAN HELP:

  • We provide a step-by-step route to comply with the EU CBAM and can help forecast the financial exposure this regime can impose on your operations.
  • We advise on the reporting requirements and assist with achieving compliance before the key deadlines 
  • We provide targeted information needed to plan prudent risk management strategies to mitigate the financial cost associated with the CBAM
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Who will be affected by CBAM?

As a result of the EU CBAM’s scope into downstream articles, including items such as screws, nuts, bolts and similar products of iron or steel, a significant number of importers will have a newly incurred compliance obligation as a result of this legislation.

A few of the many industries impacted are: 

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Construction companies and material distributors (cement, aluminium, iron, steel)
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Automotive and aerospace manufacturers (aluminium, iron, steel)
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Advanced manufacturing (aluminium, steel)
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Chemicals companies (precursors, fertilisers)
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Food retail value chain (aluminium foil)

Questions to consider

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How do I know if my company is subject to CBAM?
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How much will my exposure to the EU ETS change as a result of CBAM?
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What is the penalty if I don’t comply?
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Will I need a new registry account?
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How will I measure and report my emissions?
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What will the financial impact be as a result of this regulation?
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What is a punitive default value?
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What is a system boundary?
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Is verification required during the transition period?
Download our FREE guide for all of the answers to your questions and more...
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How will certificates work

Importers in the EU will be required to purchase CBAM certificates. The certificate price will be calculated based on the average weekly auctions of the EU ETS. If no auctions are held in a given week, the price will be set up as the average of the previous week. 

The CBAM certificates cannot be traded, have limited validity (July 1st of each year, commencing 2027), and can only be sold to authorised declarants.

Validity of CBAM certificates from 2027: Up to July 1st of each year
Surrender deadline for CBAM certificates from 2027: May 31st of each year
Transaction platform for CBAM certificates: the CBAM Registry, managed by the EU Commission.

The authorised CBAM declarants shall ensure that the number of CBAM certificates on their CBAM registry account at the end of each quarter matches at least 80% of their embedded cost of carbon in imported products.

The threshold of 80% of imported goods (required each quarter) which is based on default values.

In cases where imported products have already been subject to robust carbon pricing in their country of origin, the paid carbon price can be reduced from the EU CBAM charges, provided evidence is available.

The transitional period Oct 2023 - Dec 2025

The transitional period for the CBAM begins on October 1st, 2023, and extends until 2026. During this period, importers within the scope of the CBAM must report emissions embedded in their goods at the time of import into the customs territory of the EU. Once the transition period concludes, the CBAM’s scope will be re-evaluated to determine if additional products and services, including indirect emissions, should be included. Another important clarification to be addressed is the methodology used to determine the carbon intensity of imported goods. The revaluation of sectors exposed to the CBAM will take place one year before the end of the transitional period.

Likely sectors to be added after the 2025 transitional period:

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Paper & Pulp
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Plastics
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Organic Chemicals and or polymers
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Glass
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Oil Refining

Solutions

Understanding the EU CBAM and its implications is crucial for businesses both within Europe and abroad. At Redshaw Advisors, we are dedicated to empowering strategic decision-making by providing up-to-date transparency on the CBAM legislation. We offer valuable insights into direct and indirect cost forecasting, MRV requirements, and risk management recommendations for companies already exposed to the EU ETS, as well as importers required to participate in this regime.

Would you like to learn more about CBAM?

Book a free consultation with our advisors.

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Confused about the new EU Carbon Border Adjustment Mechanism (CBAM)?

Contact Redshaw Advisors today for valuable insights and strategic decision-making aid on CBAM implications.

Contact Us Today by calling +44 20 3637 1055 or email us by completing the form below.

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