CBAM

CBAM (Carbon Border Adjustment Mechanism) is a reporting and financial obligation mechanism aligned with the EU ETS, based on embedded greenhouse gas emissions occurring during the production of certain products imported into the EU. Its main framework is regulated by Regulation (EU) 2023/956. Transition period focus: data collection + emission calculation + reporting discipline Definitive implementation period focus: annual declaration + CBAM certificate + cost management

The initial CBAM scope focuses on carbon-intensive, high-trade product groups: 1. Cement (clinker/cement – process emissions are critical) 2. Iron & steel (varying profile depending on BF-BOF / EAF routes) 3. Aluminium (electricity consumption and grid mix are determining) 4. Fertilizers (especially nitrogen fertilizers – ammonia/energy-intensive processes) 5. Hydrogen (SMR vs electrolysis – evidence required, not claims) 6. Electricity (cross-border electricity trade and emission factors) Since CBAM scope may expand over time, in addition to the question "are we in scope today?", an analysis of "what happens if scope expands?" should also be conducted.

Producers/exporters exporting to the EU: The producer provides emission data; if data quality is weak, commercial risk increases. EU importers / compliance teams: Declaration and certificate obligations are managed on the importer side; incorrect/incomplete data is an audit risk. Companies managing supply chains: CBAM cost directly affects contract-pricing-delivery plans.

A CBAM certificate is a compliance unit corresponding to the verified embedded emissions of imported CBAM-scope goods. The authorized CBAM declaration holder purchases the required number of certificates within the scope of the annual declaration and delivers them for the relevant year. In summary: Certificate quantity is determined by emissions, and total cost is determined by certificate price.

With Pier Compliance approach, the calculation is tied to an "auditable" template: Step 1 — Total embedded emissions by product Total Emissions (tCO₂e) = Import Quantity (tons) × Product embedded emission factor (tCO₂e/ton) Step 2 — Adjustments and discount logic Certificate requirement is clarified within the framework of mechanisms in the regulation (e.g., adjustments aligned with EU ETS free allocation logic and discount approach related to carbon price paid at origin). The critical issue at this step: evidence/traceability and consistency of calculations. Step 3 — Net certificate requirement Result: Net certificate quantity is determined based on "Total verified embedded emissions for the year" and prepared for annual declaration.

Simple cost framework: CBAM Cost (€) = Net Certificate Quantity (tCO₂e) × Certificate Unit Price (€/tCO₂e) Pier Compliance here, instead of a "single price" approach, establishes together: • price scenarios (low-medium-high) • in-year budget plan • customer reflection / supplier negotiation framework.

1) Scope analysis and HS/CN matching • Product portfolio screening (CBAM scope eligibility) • HS/CN validation and risk map • Early warning for products approaching scope 2) Embedded emissions data model setup • Facility/line-based data templates • Standardization of process, fuel, electricity data • Data dictionary + evidence document list + revision management 3) Emission calculation and data quality assurance • Calculation logic aligned with production route • Action plan for missing/data uncertainty scenarios • Auditable filing (record-evidence-version discipline) 4) Supplier & customer coordination • CBAM data request package for suppliers (form + example + evidence list) • Output standard in the format expected by EU importer • Contract clauses and responsibility matrix recommendations 5) Reporting operations and compliance timeline • Periodic workflow (RACI) • Checklists, deadline management, revision/correction procedure • "Ready file" arrangement in internal audit logic 6) CBAM certificate and cost strategy • Certificate quantity and budget scenarios • Cost impact: integration into pricing/quotation strategy • Decarbonization action plan (competitive advantage)

Scope & Gap (Week 1): Product list + HS/CN + data gaps Data model (Weeks 2–3): Templates + responsibilities + evidence set Pilot calculation: Testing and quality control on selected products Operations: Reporting cycle + revision management Cost & strategy: Certificate/cost scenarios + contract/price strategy