Filipino companies exporting particularly iron and steel, aluminum, cement and fertilizers to the European Union (EU) are advised to prepare for the implementation of a new regulation that will account for carbon in traded goods.
Aaron Cosbey of International Trade Centre said only 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).
The European Parliament and the Council of the EU have reached a provisional agreement to implement the CBAM from October 1, 2023. The scope will be extended to hydrogen and some 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,” he said.
Under the CBAM, Cosbey said producers should register their operations in an EU-maintained central database with basic information.
He said they need to commission an accredited verifier to assess each installation’s greenhouse gas (GHG)-intensity for specific goods and provide this information to authorized declarants.
“Submitting the resulting data is technically the importer’s responsibility but in practice, importers will demand this data from producers,” he added.
Cosbey said importers, which are called declarants, on the other hand, have 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 tonnes of GHG were embedded in that goods. And then they submit CBAM certificates equal to the number of tonnes of embedded carbon,” he added.
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 the CBAM.
He said 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.
Others include lobbying in the World Trade Organization (WTO) and elsewhere for coordination among countries considering CBAM, ramping up existing support for industrial transformation in energy-intensive, trade-exposed sectors, and putting in place national carbon pricing, he added.
Cosbey said the Philippine government can be a conduit of information for Philippine exporters on the CBAM and other types of legislation in the pipeline.