EU Carbon Border Adjustment Mechanism (CBAM) Compliance Requirements for the Automotive Industry: Timeline for 2024-2025 Regulations and How to Address Practical Issue

Zeroboard Inc.

Taku Nozoko, General Manager, Solution Development Office, Sales Division Kensuke Murai, Business Strategy Office and European Research Center Masaki Kinoshita, Solution Development Office, Sales Division

Starting in October 2024, the EU's Carbon Border Adjustment Mechanism (CBAM ) will tighten regulations, making it mandatory to obtain primary data from suppliers for "complex goods," which are subject to the regulation. This article details the timeline from the emission amount period to full implementation (2026), the data integration methodology across the Manufacturing chain, which is the biggest practical obstacle, and the risk of penalties if not implemented. Downloadable documents also include a list of specific CN codes and calculation logic.

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Below is a summary of the column, which you can download.

1. What is CBAM?

The Carbon Border Adjustment Mechanism (CBAM ) introduced by the EU is a system that imposes a carbon cost on products imported from outside the EU with the aim of preventing carbon leakage. From 2026, companies will be required to purchase " CBAM certificates" linked to the EU-ETS (the EU's emission amount Trading Scheme). In the automotive industry, this mainly applies to steel and aluminum parts, and management of emission amount information tracing back through the supply chain will be required.

2. What items are subject to CBAM in the automotive industry?

In the case of automotive parts, not only simple materials but also processed parts such as bolts, screws, and pipes are considered "Complex Goods" and are covered by CBAM. This document lists the CN codes (7301, 7318, 7604, etc.) of the specific parts covered and provides detailed information to help you determine whether your company's products are subject to reporting obligations.

3. Timing of future CBAM changes

The practical flow is constantly changing, with the "mandatory primary data reporting" from October 2024 onwards and producers being able to directly access the CBAM registry in 2025. We will explain the important schedules that the automotive industry must keep in mind in chronological order, including the full implementation from 2020 to 2026 and the plan to expand the scope of applicable products (organic polymers, etc.) towards 2030.

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4. Issue and Solutions for Collaborating with Suppliers in CBAM

The biggest practical Issue are collecting information from multi-layered supply chains (data sharing in a relay format) and dealing with the complex reporting format (Communication Template) specified by the EU. This document presents solutions to specific Issue in supplier collaboration, such as the "complexity of English templates" and "gaps in calculation methods (weight apportionment, etc.)," ​​and how to promote efficient cooperation systems and introduce tools.

5. Risks of not responding

Failure to comply with CBAM could result in penalties of €10 to €50 per ton of unreported emission amount(€100 when fully implemented). Taking into consideration not only increased costs but also the risk of losing competitive advantage in the European market and being excluded from the supply chain, companies are urged to establish a system as soon as possible.

6. Conclusion

With full implementation expected in 2026, companies will need to systematize the process from "calculation" to "reporting." This document provides details on our CBAM support consulting services and efficient data integration and reporting support using the CO2 calculation tool "Zeroboard."

For automotive OEMs, battery manufacturers and their suppliers
Zeroboard for batteries
A solution that complies with EU Battery Regulation and enables data integration with the Uranos ecosystem
View Details

throughout the supply chain
GHG emission amount calculation/visualization,
For centralized management of environmental items
Zeroboard

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＜Reference source＞

*1)Source: Annexes to the CBAM Implementing Regulation for the transitional phase:

https://taxation-customs.ec.europa.eu/document/download/97ae41e4-f785-40fd-b4df-f141ad69f522_en

*2)Source: Transitional CBAM Registry user manual for Declarants:

https://taxation-customs.ec.europa.eu/document/download/47322ae4-27c9-49f1-bdb7-2a1fef73d647_en?filename=CBAM-UMN-UI%20manual%20for%20Declarants-%20Release%201.3-v.1.64.pdf

*3)Source: CBAM Quarterly Report structure (XLS format):

https://taxation-customs.ec.europa.eu/document/download/d948f0eb-1374-4acd-a217-a3d5a5d0aeb3_en?filename=Report%20Structure%20ver%2019.10.xlsx

*4)Source: CBAM Communication Template for installations:

https://taxation-customs.ec.europa.eu/document/download/2c15cd0e-2447-4ef8-ab70-68b80b66ede8_en?filename=CBAM%20Communication%20template%20for%20installations_en_071123.xlsx

*5)Source: CBAM - Questions and Answers:

https://taxation-customs.ec.europa.eu/document/download/013fa763-5dce-4726-a204-69fec04d5ce2_en?filename=CBAM_Questions%20and%20Answers.pdf