MDTI

CBAM Price Calculations and Measures

The « CBAM » regulation is an EU customs duty reflecting the carbon emissions in imported goods. Purchase of CBAM Certificates will be necessary for the goods to enter the UE.

Objectives of the Carbon Border Adjustment Mechanism (CBAM)

  • Prevent carbon leakage
  • Indirectly motivate foreign manufacturers to lower GhG
  • Complement the EU ETS
  • Reinforce international climate agreements and actions

Details

As the EU increases its climate ambitions, the gap with third countries’ climate action is expected to widen, with an increased risk of carbon leakageCarbon leakage occurs when a business transfers its production to another country with less emission constraints, in an «environmental dumping » objective.

Additionally, imports from countries with less or no GhG constraints may appear mechanically more competitive due to the added constraints and costs upon businesses inside the EU and other countries with strong climate policies.  

Currently, the risk of carbon leakage is partially addressed under the “EU ETS” which is being extended to maritime transport, buildings, and road transport sectors. The CBAM specifically addresses imports of goods at EU borders and is  WTO compliant. 

Concerned Goods and measured GhG

The CBAM is meant for any goods but only a few goods are listed right now.

  • Cement (CO2)
  • Iron and Steel (CO2)
  • Mineral and Chemical Fertilizers and related chemicals (CO2 N2O)
  • Aluminum (CO2, PFC)
  • Electricity (pre-calculated value)

Mechanism

The price to pay for the Certificates reflects the « embedded GhG emissions » of the imported quantities.

The « Specific Embedded Emissions » (SEE) is expressed in « CO2 per Tons of goods », and only concerns direct emissions necessary to the production of the goods (Scope 1 only).

Electricity is subject to different certificate values and methods due to the singularity of the energy market and transportation methods. 

Certificate Price Calculation

Everything is in the downloadable document below summarizing CBAM Appendix 1. 

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