CBAM (Carbon Border Adjustment Mechanism) is a policy tool designed to prevent carbon leakage and protect the competitiveness of companies in countries with higher carbon prices. This mechanism typically involves imposing additional carbon fees on imported goods sourced from countries that do not have strict regulations on carbon emissions or have low carbon prices. CBAM aims to ensure that imported goods compete fairly in cost with goods produced in the internal market and pay for carbon emissions.

 Timing of CBAM certificate purchase requirements 

The specific operational details of CBAM depend on the specific policies of the country or region implementing the mechanism. The following are the general situations when you need to purchase a CBAM certificate:

 1.     Imported goods: When the carbon emissions from the production process of the goods imported by the enterprise are not fully reflected by the carbon price of the country of origin, the enterprise may need to purchase CBAM certificates. This means that if the cost of carbon emissions in the country of origin is lower than the corresponding cost in the importing country, the importer will need to make up the difference.

 2. When the policy takes effect: Only when the importing country officially implements the CBAM policy and the policy takes effect, relevant companies need to start purchasing certificates. For example, the European Union plans to start piloting CBAM in 2023 and plans to fully implement it in 2026. 

3. Specific Product Categories: Typically, CBAM focuses on carbon-intensive products such as steel, cement, aluminum, fertilizers, and electricity. If importing these products, companies need to understand the corresponding policy requirements and certificate purchase procedures.

 4. Compliant Reporting: Importers are required to report the carbon emissions of their imported goods according to regulations to determine the carbon emissions and corresponding costs required for purchase certificates.

 The specific timing and process of purchasing CBAM certificates will be affected by relevant policy details and guidance, and importers should pay close attention to policy trends and prepare corresponding compliance measures to cope with new trade conditions. Before conducting import activities, it is essential to understand and evaluate the impact of CBAM, which can help avoid potential financial risks and develop more cost-effective business strategies. 

What criteria are used to determine the emission of imported products that require the purchase of CBAM certificates? 

Under the Carbon Border Adjustment Mechanism (CBAM), the criteria for determining whether to purchase CBAM certificates for the carbon emissions of imported products are mainly based on the following aspects: 

1.  Product-specific benchmark emissions: 

•  Each product category may have a set baseline emissions, which is usually determined based on the average amount of CO2 released by the product during production.

• If the actual emissions of the imported product exceed this benchmark, the importer will need to purchase a CBAM certificate for the excess.

 2. Carbon Pricing of Production Country: 

•  If the country where the product is produced has implemented a carbon pricing mechanism (such as a carbon tax or a carbon trading system), it is necessary to consider whether these costs cover the corresponding carbon emissions.

• The CBAM calculation for the importing country will deduct the portion of the carbon price paid by the producing country, and only compensate for the uncovered portion of the carbon cost. 

3. Carbon Pricing and Policy of Importing Country: 

• Importing countries set relevant carbon emission standards based on their own carbon prices and climate policies. 

• This usually means that importers need to purchase sufficient CBAM certificates to cover the carbon emissions of imported products based on the importing country's climate policies and carbon pricing mechanisms.

 4. Product Categories and Emission Records: 

• Specific product categories, such as high-carbon emission products such as steel, cement, and fertilizers, will be the focus of CBAM.

•  Importers need to determine the necessary voucher purchase volume based on the specific emission records of these products. 

5. Third-Party Verification:

• To ensure transparency and accuracy, imported carbon emissions may need to be verified by a third party.

• This helps ensure that all data is accurate and compliant with the specified requirements, and efficiently calculates the number of CBAM certificates that should be purchased.

 Importers need to pay close attention to relevant policy changes in the importing country and prepare corresponding documents and supporting materials to support the carbon emission declaration of their products. This includes all carbon emissions data from production to transportation to correctly calculate the number of CBAM certificates to be purchased. 

 What is the actual emission benchmark for imported products? 

How much excess do I need to purchase a CBAM certificate? 

The implementation details of CBAM (Carbon Border Adjustment Mechanism) will vary depending on the specific policy and implementation region, but the basic principles generally follow the following pattern: Benchmark the actual emissions of imported products

1.  Industry benchmarking: 

•  The importing country sets benchmark emissions based on typical carbon emissions data for each industry. These baseline emissions are typically based on the average carbon emissions of the industry's most efficient or technologically advanced production methods.

•  For example, in the steel industry, a production facility with the lowest carbon emissions globally at 10% may be used to set a baseline emissions. 

2. Specific Product Benchmarks: 

• The baseline emissions for specific products are also adjusted based on factors such as product type, production process, and raw materials used. 

Excess Voucher Purchase Requirements

1.Carbon Emissions Calculation: 

•  Importers need to calculate the actual carbon emissions of each product based on the production details of the products.

• This may require detailed production process data and emissions records obtained from the country of production. 

2. Calculations beyond the benchmark:

•  If the actual carbon emissions of the imported product are higher than the set baseline emissions, the importer needs to purchase a CBAM certificate for the excess. 

• The number of certificates purchased is usually calculated based on the excess per ton of CO2 emissions. 

3. Voucher Price: 

•  The price of CBAM certificates is usually related to the carbon pricing mechanism of the importing country, such as carbon taxes or prices in carbon trading markets.

•  The price of the certificate may change due to market conditions and policy adjustments. 

Implementation Challenges 

• Data Acquisition and Verification: Ensuring accurate and complete production and emissions data from overseas suppliers is a major challenge.

•  Compliance and Enforcement: Adhering to new norms and enforcement processes can involve additional administrative and regulatory burdens for importers. 

Currently, CBAM is mainly promoted by the EU and is scheduled to be fully implemented in 2026, and importers need to pay close attention to specific policy trends and implementation details in order to adjust their strategies in a timely manner and conduct international trade activities legally and compliantly. 

How many CBAM certificates do I need to purchase if I exceed the emission baseline (emission permit limit)? How to set standards? 

1.The implementation details of CBAM (Carbon Border Adjustment Mechanism), including how to determine how many certificates need to be purchased and how standards are set, all depend on the specific regulations and policies that implement the mechanism.

 The following is the calculation method and standard setting principles for purchasing CBAM certificates in excess of the carbon emission baseline in the general process: 

Voucher purchase calculation method 

1. Determine the actual emissions of the product: 

• First, it is necessary to calculate or obtain the actual carbon emissions of imported products. This usually requires detailed data on the production process, including the type of energy used, raw material sources, etc.

2. Comparative baseline emissions: 

• Compare the actual emissions of the product with the baseline emissions (emission permit limits) corresponding to the product category specified by the CBAM.

• Baseline emissions are usually set based on the most efficient production method in that product category, or the average carbon emission standard for that category.

 3. Calculate the Excess Parts: 

• If the actual carbon emissions exceed the baseline emissions, a corresponding CBAM certificate must be purchased for each unit of carbon emissions exceeded (usually measured in tons of CO2).

 Standard Setup Method

1. Benchmarking Principles: 

• Benchmark emissions are set taking into account factors such as industry averages, technical feasibility, and environmental goals. 

•  Regions like the European Union may conduct market research and technological evaluations to ensure that benchmarking is both scientific and challenging, promoting industrial upgrading and the application of environmentally friendly technologies. 

2. Policy Formulation Process: 

•  When formulating benchmarks and CBAM policies, governments or relevant agencies often conduct extensive stakeholder consultations, including industry associations, enterprises, environmental organizations, and scientific research institutions.

• This helps ensure that policies are fair and effective, and they gain widespread support from the industry. 

Implementation Effect Evaluation and Adjustment 

• With the implementation of CBAM policies, periodic evaluations and adjustments may be made based on actual effects and market feedback. 

• This includes regular updates to baseline emissions to reflect new technological advancements and market changes.

 Therefore, the exact number of CBAM certificates to purchase and how to set benchmark emissions will depend on the specific CBAM implementation regulations in the region. Importers need to pay close attention to relevant policy trends in the importing country and collaborate with professional carbon management consultants or legal advisors to ensure compliance and maximize operational efficiency.