Next to the CBAM implementing regulation adopted by the European Commission on 17 August 2023 regarding the reporting rules applicable during the transitional phase of the Carbon Border Adjustment Mechanism (CBAM) (please find a previous alert by our team here), the European Commission released a set of new CBAM documents in October. These are in chronological order:
- Application User Manual – CBAM Declarant Portal on 3 October 2023;
- New version of the CBAM Communication template for installations on 23 October 2023;
- New version of the Guidance Documents on CBAM Implementation:
- for installation operators outside the EU on 26 October 2023; and
- for importers of goods into the EU on 27 October 2023.
In addition, note that the national authority designation process still is inconclusive for a number of Member States, even after the latest update of 30 October 2023. Several Member States, such as still Czech Republic, Germany, Spain, Lithuania, Latvia, Romani and Slovenia, did not yet designate their National Competent Authority (NCA). This causes problems for CBAM Declarants in such Member States who cannot access the CBAM Declarant Portal as they first need to request access from the NCA of their Member State.
We will provide some high-level observations on these documents below without going into detail.
- Application User Manual – CBAM Declarant Portal
The CBAM Declarant Portal has been open to users, and the European Commission has published the Application User Manual last month.
This Manual provides structured guidance to CBAM Reporting Declarants on how to use the CBAM Declarant Portal. Specifically in Chapter 3, depicts how to access the CBAM Declarant Portal and explains its general functions, while in Chapter 4 more graphic detail is provided on how to use the portal and its specific functions as a CBAM Reporting Declarant.
- CBAM communication template for installations
On 23 October 2023, the European Commission published a new version of the communication template for installations, and made the following changes to the one released online in August on:
- UNLOCODE, now made mandatory (Sheet A);
- The calculation of emissions, which has been corrected by adding a missing factor of 3.664 in the mass balance (Sheet B);
- The inconsistency of certain cells in Sheet C (L16 “manual entries” and L17 “results”);
- Bugs on “electricity exported” (Sheet D);
- Broken references to “production process 1” (Sheet Summary processes); and
- The possibility to enter “scrap per t steel/ aluminum: values > 100%” (Column W – sheet summary products).
The CBAM communication template for installations is a data collection template serving to facilitate the communication between operators of operators in third countries and reporting declarants. The template is made of different sheets that contain all the relevant data elements these parties must exchange under the CBAM legislation. Use of the template by businesses affected by CBAM is optional. Although the template should cover all relevant data elements and calculations required, the template contains a disclaimer that CBAM declarants will stay responsible for reporting accurate data even if an error is caused by use of the template. We also consider that the template in ways goes beyond what is required to report under CBAM legislation. It is our experience that certain installation operators are therefore unwilling to use the template and rather tailor Annex IV of the Delegated Regulation to their own case. This is mainly because otherwise commercially sensitive information will be reported through use of the template throughout the supply chain, even though CBAM does not legally obliges installation operators to do so.
- Revised version of Guidance document
The European Commission published on 26 October 2023 revised versions of Guidance documents on CBAM implementation, initially released in August 2023, (a) for installation operators outside the EU, and (b) for importers of goods. This document provides non-legally binding guidance that can be used to assist with the CBAM monitoring and reporting requirements during the transitional period, from 1 October 2023 to 31 December 2025.
a. Guidance document on CBAM implementation for installation operators outside the EU
In this version, the European Commission:
- clarifies the structure of the monitoring requirements on quantification of electricity and CHP (section 6.7.3);
- improves worked examples for cement (section 7.1.3), steel (section 126.96.36.199., in particular calculation of the waste gas deduction), mixed fertilizer (section 7.3.2.), aluminum (section 7.4.2) and hydrogen (section 7.5.2 – not all produced H2 is sold).
As a reminder, and asides from providing a guide for operators and introduction to CBAM, the guidance sets out the different production processes for all covered products by sector and identifies potential points of attention for CBAM. Sectors identified are the
- Cement sector;
- Chemicals – Hydrogen sector;
- Fertilizers sector;
- Iron and Steel sector; and the
- Aluminum sector.
The guidance proceeds with guidance that is generally applicable to all businesses and in the next sections provides sector tailored guidance as well. The document concludes with providing details on exemptions applicable to CBAM. Needless to say, this creates a very comprehensive document, which is the result of introducing the most far-reaching greenhouse gas (GHG) reporting requirements ever adopted. This is proving specifically difficult as it targets operators not established within the territory of the EU active in wildly different sectors. This obliges such operators to work together with EU importers (acting as CBAM declarants) to provide them with the required data for their products to be able to be exported to the EU.
b. Guidance document on CBAM implementation for importers of goods
Very limited changes have been made on the revised Guidance document for importers, except updates on the reporting template (section 6.3).
Likewise to the guidance document for installation operators, this document also provides a quick guide and general overview for CBAM. Importers are then provided with guidance on sector specific points of attention with respect to identifying goods covered, production processes or routes and additional reporting parameters. Then extensive detail is provided to report direct and indirect embedded emissions in CBAM covered products by importers. Similar to the previous document, it is also concluded with guidance on specific CBAM exemptions.
When assessing all documents it must be borne in mind that, although they reflect the opinion of the European Commission, they are not legally binding to businesses affected by CBAM. So although all the documents provide thorough guidance and can be of great value to those affected by CBAM, actors must remain critical of the contents therein.