The CBAM emissions calculation: what every importer needs to know

The Carbon Border Adjustment Mechanism (CBAM) adds a new layer of complexity for importers. It requires a thorough understanding of the emissions linked to imported products. This process is not just a formality. It directly influences import costs and regulatory compliance.

In this article, we reveal the essential principles of calculating emissions for the MACF. We explore the accepted methodologies, the necessary data, and the impacts of these calculations on your business. This practical guide is intended for importers and suppliers. It aims to clarify procedures and provide strategies for effective emissions management under this European regulation.

Basic principles of calculating emissions

The MACF is designed to prevent carbon leakage. It does so by imposing a carbon price on imports of certain carbon-intensive products. For importers, understanding how emissions are calculated is critical. It determines both cost estimates and compliance planning.

1. Definition of the emissions concerned

MACF calculations consider both direct and indirect emissions from the manufacture of imported products. Direct emissions come from processes controlled by the company, such as fossil fuel combustion. Indirect emissions result from the consumption of electricity, steam, or heat. These energy sources are necessary for production but not generated directly by the company.

2. Use of verified data

The data used to calculate emissions must be accurate and verifiable. Importers must ensure that information from foreign producers complies with European standards, or with standards the EU considers equivalent.

3. Calculation methodology

Emissions are calculated using sector-specific emission factors and data on production energy intensity. Businesses apply these factors to raw material quantities and energy consumed. The result gives total emissions in tons of CO2 equivalent.

4. Conversion to CO2 equivalents

After calculating direct and indirect emissions, they must be converted into CO2 equivalents (CO2e). This uses specific conversion factors. They translate the climate impact of various greenhouse gases (GHGs) into a standardized unit. This step is crucial for assessing GHG emissions of imported products under MACF standards.

Calculation methodologies

The CO2 calculation for the MACF is crucial. It determines the number of certificates importers need to buy. Below is an explanation of the methods used to ensure accurate and consistent emissions estimates.

A- Use of default values

When actual data is unavailable, MACF allows the use of default values. These are based on sector averages and simplify the estimation process. They are less accurate, however. If default values overestimate actual emissions, importers may need to buy additional certificates.

The use of default values is limited in time and subject to conditions:

• No quantitative limit from October 2023 to end of June 2024, allowing full use of default values.
• Limit of 20% of emissions from July 2024 to end of 2025, for complex goods only.

B- Method based on real values

During the transition period, default values can be used. For greater precision, however, regulations will move toward real values based on actual production data.

Definition of real values

The real value method uses data specific to each production process. Unlike default values, which are generic estimates, actual values reflect emissions specific to a given facility. This approach is more precise. It accounts for performance variations and environmental practices specific to each production site.

Why are the actual values more accurate?

Default values are based on industry averages. They do not reflect the current practices or technological improvements of a specific company. Real data allows businesses to demonstrate the actual effectiveness of their emission reduction efforts. This is especially relevant in chemistry, metallurgy, and power generation, where practices vary considerably between players.

Data collection for the calculation of real values

To calculate emissions from real values, businesses need detailed data on:

• Direct emissions: These come from sources the company controls directly, such as fuel combustion. Data needed includes fuel types and quantities, combustion efficiencies, and specific technologies used.
• Indirect emissions: These are linked to off-site energy consumption. Information needed includes energy quantity consumed and the emission factor of the energy source. This factor varies — wind turbine versus coal, for example.

Calculation of emissions from real values

The calculation applies specific emission factors to fuel quantities burned and energy consumed. These factors are provided by EU regulatory bodies. They should be updated regularly to reflect changes in energy production or technological advances.

Challenges associated with calculating real values for the MACF

Calculating emissions is complex. The EU Excel file has twelve technical tabs. It requires accurate data accessible only to production engineers. This data must be justified, as it will be reviewed by the Auditor and EU inspectors.

A major challenge is tracing the supply chain back to the production plant. This is especially difficult when several intermediaries are involved.

From 2025, importers will need the status of "MACF Authorized Declarant". From 2026, their annual MACF declaration must include a report certified by an accredited company. Without this report, importation may be blocked. Identifying MACF-compliant suppliers is therefore essential to avoid disruptions and additional costs.

Implications for importers and suppliers

Importers will need to provide evidence of the actual emissions of products they bring into the EU. This requires close collaboration with suppliers to ensure data is available and accurate.

This requirement may encourage suppliers to invest in cleaner technologies. Their access to the European market could depend on it.

C- Emission factors and recognized methods

The MACF also accepts standardized emission factors and other approved methodologies. These are useful when facility-specific data is unavailable. They are particularly helpful for importers dealing with multiple suppliers or regions where accurate data is hard to obtain.

D- Corrections and adjustments

Emission calculations must be adjusted to reflect current production practices. Corrections may be needed for new technologies, energy efficiency improvements, or changes in raw materials used.

These methods require a thorough understanding of production processes. Close collaboration with suppliers is also essential to ensure data is accurate and complete.

Good management of this information helps meet MACF requirements. It also reveals opportunities to reduce carbon emissions and improve environmental sustainability and operational efficiency.

FAQ on calculating emissions

Q1: What are the main methods for calculating emissions under the MACF?

Emissions can be calculated using real production data or default values from European authorities. Standardized emission factors can also be used when specific data is unavailable.

Q2: How are the default values used in calculating emissions?

Default values are used when actual data is unavailable. They are based on sector averages. Their use is subject to time and quantity restrictions.

Q3: Is there a need to correct or adjust emission data?

Yes. Adjustments may be needed to reflect changes in production technologies, efficiency improvements, or different materials. They help keep calculations accurate and relevant.

Q4: What documentation is required to support emissions calculations?

Importers must provide documented evidence of direct and indirect emissions. This includes emissions reports, energy certificates, and other documentation that validates the figures used.

Q5: What checks ensure the accuracy of emissions calculations?

Data should be checked by accredited auditors. This typically includes site audits and verification of the measurement and reporting processes used by suppliers.

Data requirements and information sources

Accurate MACF emissions calculations depend on data quality and completeness. Understanding what data is needed, how to collect it, and how to validate it is essential for compliance.

Data required for the calculation

Businesses must gather detailed data on direct and indirect emissions from the production of imported goods. This includes:

• energy consumption,
• types of fuel used,
• specific industrial processes,
• intrinsic emissions of the materials used.

Accurate data at each production stage is essential to ensure the integrity of emissions calculations.

Data collection from suppliers

Reliable data collection starts with close supplier collaboration. Clear protocols must be established for data transmission. Suppliers must also understand MACF requirements.

This may require specific training for suppliers. It may also involve adopting integrated data management systems for secure and effective information sharing.

Data verification and validation

Once collected, data must be verified and validated. Businesses should implement quality control procedures to review supplier data. This may include regular audits, data verification software, or environmental data experts.

Data validation is essential. Errors can lead to non-compliance penalties or incorrect calculations of certificates to purchase.

These steps ensure companies have reliable data for accurate MACF compliance. They also minimize non-compliance risks and support the company's overall environmental strategy.

Data by sector for calculating emissions

Different sectors require specific data types due to their unique production processes. Here are examples by sector:

Steel sector:

• Energy consumption by type (electricity, gas, etc.),
• Production intensity (tons of steel per unit of energy consumed),
• Types and quantities of raw materials used (iron ore, coal, etc.).

Cement sector:

• Clinkerization rate (proportion of clinker in cement, indicative of carbon intensity),
• Types and proportions of clinker substitutes (fly ash, slag, etc.),
• Thermal and electrical energy consumption per ton of cement produced.

Chemical sector:

• Types of chemical processes and their energy consumption,
• Direct emissions from chemical reactions,
• Quantity and type of intermediate chemical products purchased.

Aluminum sector:

• Production process (electrolysis vs. recycling),
• Specific energy consumption per ton of aluminum,
• Use of low-emission technologies, such as inert anodes.

Practical application and use cases

This chapter provides case studies and practical tips for integrating calculations into importer operations.

Case studies: successful adaptation to MACF

Case 1: A European steel manufacturer revised its emission calculation methods to comply with the MACF. It adopted cleaner production technology and renegotiated supplier agreements to include carbon performance clauses. Emissions dropped by 30%. The number of MACF certificates required fell significantly, reducing operational costs.

Case 2: A major fertilizer importer implemented a real-time system to monitor emissions per batch of imported products. This allowed it to optimize the number of certificates required and avoid costs linked to inaccurate estimates.

Tips for integrating calculations into business operations

1. Establishing Strategic Partnerships: Work with suppliers committed to reducing their carbon footprint. Include clauses for regular audits and production practice updates to improve energy efficiency.
2. Use of Specialized Software: Invest in software that automates CO2 calculations accurately. These tools can also simulate scenarios to find the most cost-effective certificate purchasing strategies.
3. Continuing Education: Train compliance teams regularly on the latest calculation methodologies and regulatory changes. This keeps their understanding of requirements sharp and up to date.

Impact of calculations on emissions management and compliance

Accurate emissions calculations are essential for MACF compliance. They can also significantly reduce costs for importers.

Compliance and reputation: Accurate calculations ensure EU compliance and strengthen reputation in international markets. Compliant importers are seen as more reliable, which sets them apart from competitors.

Optimizing costs: Precise calculations make it possible to:

• Identify the main emission contributors in processes or at suppliers,
• Target interventions to improve energy efficiency or use less polluting materials,
• Reduce the cost of MACF certificates and promote long-term sustainability.

Adaptation to regulations: Correctly applying emissions calculations prepares businesses for regulatory changes. It allows them to adjust supply policies and avoid disruptions.

Strategic planning: Good calculation management supports future investment planning in technologies and infrastructure for optimal emissions management.

In conclusion

Accurate emissions calculations are critical to meeting MACF requirements, reducing costs, and avoiding penalties. They require a solid understanding of the data needed, valid calculation methods, and their practical implications for business operations.

At Keewe, we offer solutions that simplify this process. We help you collect and verify the data needed for accurate calculations. Our tools and services ensure simplified, compliant MACF management. You can focus on your core business while optimizing compliance.

‍