Glossary

The official name is the Carbon Border Adjustment Mechanism.

The scheme was introduced as part of the "Fit for 55" policy package announced by the European Union in 2021.Target departmentThe aim of taxing imported goods based on the amount of carbon dioxide (CO2) emitted during the Manufacturing process is to maintain a fair competitive environment with local companies and prevent carbon leakage.

Importers subject to the scheme will be obligated to purchase CBAM certificates in proportion to the amount of CO2 emitted during the Manufacturing of their products, which will apply the same cost burden as the carbon price in the EU to imported products.

CBAM will be gradually implemented from 2026, with full implementation scheduled for 2034.

The official name is the Corporate Sustainability Due Diligence Directive.

A directive enacted by the European Union (EU) to require companies to conduct due diligence regarding human rights and the environment.

This Directive can apply both inside and outside the EU, so Japanese companies need to know whether it applies to them, their subsidiaries and business partners.

The requirements are: within the EU, "companies or ultimate parent companies with worldwide net sales of more than 4 million euros and more than 1,000 employees"; outside the EU, "companies with net sales in the EU of more than 4 million euros" or the ultimate parent company if the criteria are met across the entire group.

Application start date for non-EU companies:

- End of 7 2027: Companies with net sales of more than 15 billion euros within the EU.

- End of 7 2028: Companies with net sales of more than 9 million euros within the EU.

- End of 7 2029: Companies with turnover of more than 4 million euros within the EU.

Companies are subject to the following 2 obligations:

(1) Due diligence obligations regarding human rights and the environment

(2) Obligation to respond to climate change

Companies need to be aware of their obligations under the Directive, as non-compliance with these obligations may result in sanctions and penalties.

The 26 Conference of the Parties to the United Nations Framework Convention on Climate Change was held in Glasgow, UK in November 2021. Currently, 197 countries and regions are members.

The Glasgow Climate Accord was adopted at this conference. It strengthened the goal of "keeping the global temperature rise well below 2 degrees above pre- Industry levels and striving to limit it to 1.5 degrees," which was set out in the Paris Agreement adopted at COP21 in 2015, and also emphasized the gradual reduction of coal-fired power generation and the review of subsidies for fossil fuels. It also confirmed that financial support for climate change measures for developing countries would be expanded, and developed countries reaffirmed their goal of providing $100 billion in support per year.

An open ecosystem for data collaboration in the automotive industry announced in 2021. The main purpose is to improve productivity throughout the industry by sharing data throughout the supply chain and to strengthen efforts toward sustainable production and decarbonization throughout the vehicle lifecycle. Catena-X is led by major European automakers such as Volkswagen and BMW. By providing standards that allow data to be interoperable between companies and exchanging data P2P, it enables the safe use of compatible data. In addition, applications that comply with technical standards can be obtained from the marketplace, enabling fair data exchange.

“Corporate Sustainability Reporting Directive”

A directive that requires the EU to report on corporate sustainability. It will be proposed in 2021 and will be gradually implemented from 2023. The CSRD requires listed companies and large companies to transparently disclose information on the environment, society, and governance. This directive will make it easier for investors and stakeholders to evaluate the sustainability of companies. Reporting must be based on international standards, and companies will be required to provide reliable data. Therefore, third-party assurance will be mandatory.

Both technologies capture carbon dioxide without releasing it into the atmosphere, storing it underground or reusing it.

CCS is a technology that breaks down and captures carbon dioxide and safely seals it deep underground. CCU is a technology that further converts the captured carbon dioxide into fuel or chemicals for use. CCUS is the collective term for these 2. While CCS can capture large amounts of carbon dioxide, it faces various problems, such as high costs and a lack of technology for conversion.

Methane is a colorless, odorless gas made of carbon and hydrogen, and a type of greenhouse gas. In nature, it is produced in wetlands, during the digestive process of animals, and during the mining of fossil fuels. It is said to have a greenhouse effect 25 to 28 times that of CO2. When methane is burned, it is broken down into CO2 and water, and can be used as an Energy source. In addition, a technology called "methanation," which synthesizes methane from CO2 and hydrogen to capture CO2 during production, is attracting attention as one of the efforts to achieve carbon neutrality.

Carbon dioxide. A colorless, odorless gas made of carbon and oxygen, it is widely present in nature. It is produced during processes such as respiration, combustion, and fermentation, but CO2 emissions, particularly from the burning of fossil fuels, are considered to be the main cause of global warming. As a greenhouse gas, CO2 plays a role in raising the global temperature, and reducing its emissions is an urgent task. On the other hand, plants absorb CO2 through photosynthesis, so they also play an important role in maintaining the balance of the natural environment.

CDPs is an international environmental NGO based in the UK that provides environmental information disclosure programs to companies. As part of the program, it asks companies to answer questions about their GHG emission amount and reduction targets, and evaluates them based on the Contents of their responses.