Importers of steel from outside of the EU should quickly get familiar with the Carbon Border Adjustment Mechanism (CBAM) and start collecting the relevant information from their suppliers. With CBAM just days away from implementation, however, many steel buyers will struggle to obtain data for emissions imbedded in their products, especially if these have been processed by multiple suppliers.
At a Polish Union of Steel Distributors (PUDS) meeting in Warsaw on Wednesday, Tomek Orlowski and Przemek Januchta from PricewaterhouseCoopers warned that importers will ultimately bear responsibility for incorrectly calculated emissions. Following CBAM implementation from 1 October, steel importers will need to declare details about their suppliers, including manufacturing equipment and Scope 1 emissions levels.
Also important will be to state whether the supplier needs to pay any carbon tax in their home market, as this will allow the importer to reduce the cost of its emissions by the amount of tax paid in the supplier country.
During CBAM’s transition phase, which runs till 2026, there will be a €10-15/tonne of undeclared emissions penalty, the PwC consultants said at the event attended by Kallanish.
One member of the audience argued that suppliers are not yet able to provide EU importers with detailed information about their emissions. This is made all the more complicated by multiple levels of processing along the supply chain. He gave the example of one major European importer who buys hot rolled coil that was produced by a mill that bought slab from another producer, who in turn bought raw materials from somewhere else.
To account for teething problems, the EU is easing in the procedure, meaning that importers will be allowed to modify their first two quarterly CBAM reports until the submission deadline for the third report – 31 July 2024.
However, Januchta warned: “Don’t leave it till the last minute.” The next few quarters are designed to get to know the system and push suppliers into following the regulations. It’s also a case of competition. Those importers who are quicker at adapting to the new rules will ensure business continuity, he added.
In Poland’s case, the National Centre for Emissions Management (KOBiZE) will be responsible for processing emissions data from importers and ensuring compliance, in cooperation with Polish Customs.
Under CBAM, there will be no trading of emissions allowances like happens today with the Emissions Trading System, in order to prevent speculation. An importer will be able to sell back up to one third of its unused certificates only to authorities.
Adam Smith Poland