An international agency advised Filipino companies exporting iron and steel, aluminum, cement and fertilizers to the European Union to prepare for the implementation of a new regulation that will account for carbon emission in traded goods.
Aaron Cosbey of International Trade Center said a clutch of emission-intensive trade-exposed goods, including electricity, would be covered under the EU Commission proposal on the carbon border adjustment mechanism.
CBAM is a key part of EU’s climate action and promotes the import of goods by non-EU businesses that fulfill the high climate standards applicable in the 27 EU member states.
The European Parliament and the Council of the EU reached a provisional agreement to implement CBAM starting Oct. 1, 2023. The scope will be extended to hydrogen and several downstream products.
“CBAM is a border measure designed to make it such that foreign producers of certain goods face the same carbon costs that are faced by EU producers,” Cosbey said.
Cosbey said that under CBAM, producers should register their operations in an EU-maintained central database with basic information. He said ITC needed to commission an accredited verifier to assess each installation’s greenhouse gas-intensity for specific goods and provide this information to authorized declarants or importers.
ITC is an agency under the World Trade Organization and the United Nations.
“Submitting the resulting data is technically the importer’s responsibility but in practice, importers will demand these data from producers,” he said.
He said that importers, or declarants, needed to apply for an authorization to import CBAM-covered goods before importing.
“When you receive that authorization, you are an authorized declarant. By May 31 of each year, all authorized declarants have to submit a report which basically says CBAM goods they import during that year and how many tons of GHG were embedded in that goods. And then they submit CBAM certificates equal to the number of tonnes of embedded carbon,” he said.
Cosbey said the Philippine government and institutions like ITC have the ability to help Filipino exporters take advantage of the opportunities and avoid the risks involved in instruments like CBAM.
Exporting country policy options are compiling statistics on national sectoral emissions and transmitting to the EU, lobbying the EU to support exporters’ costs of certifying data and build exporters’ capacity to comply with CBAM and building exporters’ capacity for internal carbon accounting.
Cosbey said the Philippine government could be a conduit of information for Philippine exporters on CBAM and other types of legislation in the pipeline.