CBAM Part 2: Your EU Customer Wants Carbon Information - What Do You Need to Provide?
Once you know that your product is covered by CBAM, or may be affected by the proposed expansion; the next question is usually:
What carbon information will our European customer need from us?
This is where many manufacturers assume they will need a full Life Cycle Assessment, complicated carbon software or an entirely new environmental reporting system.
In most cases, that is not what CBAM requires.
Your importer has two main options
For covered goods, the European importer may generally use either:
an EU default emissions value
or
the actual verified emissions from the factory that produced the goods.
That choice can be important.
The EU publishes default emissions values for covered products. These are intended to give importers a usable figure where reliable actual emissions data is not available.
However, the default system is deliberately conservative.
For several major CBAM sectors, including iron and steel and aluminium, default values receive a mark-up that increases over time.
That creates an incentive for efficient manufacturers to calculate and prove their own actual emissions rather than simply accepting the default.
Why could actual emissions matter?
Imagine two Australian manufacturers selling similar products into Europe.
One factory uses modern equipment, relatively low-carbon electricity and efficient production methods.
The other uses an older, more carbon-intensive process.
If both rely on the same general default value, the cleaner factory receives little recognition for its better performance.
But if the cleaner manufacturer can demonstrate lower actual emissions, its European customer may be able to use that lower figure for CBAM purposes.
That can reduce the carbon cost associated with importing the product.
In other words, carbon performance can become another point of competition between suppliers.
Does this mean we need a full LCA?
Not necessarily.
CBAM is not the same as a conventional Life Cycle Assessment, or LCA.
A traditional LCA may examine a product across its entire life:
raw materials → manufacturing → transport → use → disposal.
CBAM has a narrower purpose.
It focuses on the emissions associated with producing the particular CBAM good, using calculation rules and boundaries set by the EU.
Depending on the product, the calculation may include things such as:
fuel used in production;
process emissions;
electricity use where relevant;
production quantities;
certain raw materials or precursor products; and
emissions associated with those specified precursors.
An existing LCA, carbon footprint or environmental reporting system may still be useful because much of the underlying information could already exist.
But it cannot simply be substituted for the CBAM calculation.
What information might your factory already have?
For many Australian manufacturers, the starting point is not collecting entirely new data.
It is finding and organising information that already exists.
That may include:
energy bills;
electricity meter data;
gas and fuel records;
production volumes;
material purchasing records;
weighing systems;
laboratory results;
engineering data; and
existing environmental or quality records.
CBAM requires this information to be organised into a reliable system for Monitoring, Reporting and Verification; often shortened to MRV.
What does “verified” mean?
If an importer wants to use your actual emissions, an internal estimate is generally not enough.
The emissions calculation must be checked by an independent CBAM-accredited verifier.
The verifier looks behind the final number.
It may examine production records, meters, fuel use, raw-material inputs, calculation methods, internal controls and supporting evidence.
Its role is to provide independent assurance that the emissions figure has been calculated correctly under the CBAM rules.
This is important because the European importer is relying on that figure when meeting its own CBAM obligations.
What should an Australian manufacturer do?
If your product is affected, the practical questions are:
Do we know our actual emissions?
Are they likely to be lower than the EU default?
Do we already hold most of the necessary production and energy data?
Can that information be organised and independently verified?
For many businesses, the biggest first step is simply understanding what information is already available.
In Part 3, we look at how to turn this into a practical preparation plan for exporting to Europe.
If you are unsure what emissions information your European customer may require, or whether using actual emissions could benefit your business, contact us to discuss your particular situation.
Is your business CBAM ready?
If you export to the EU, having accurate and credible product emissions data is becoming increasingly important. Book a complimentary LCA scoping session to understand your carbon footprint, prepare for CBAM requirements, and give your European customers the data they need.
Sources:
European Commission, CBAM Definitive Regime; European Commission, CBAM Verification; European Commission, sector guidance for non-EU installation operators.