Green Steel World November 2023 | Page 15

� POLICY � allowances is phased out until 2034 and CBAM serves as a substitute to reduce the risk of carbon leakage for the EU ’ s industry from there on .

What is the mechanism and scope of CBAM ?

CBAM starts with a transitional period from October 2023 until the end of 2025 with only reporting obligations for importers of certain goods . Importers or indirect customs representatives that transfer any CBAM goods into the EU are obliged to calculate and report the embedded emissions that occur during the production process of CBAM goods and their precursors according to detailed rules .

The definitive period of CBAM starts in 2026 . From then onwards , importers must purchase a proportional amount of CBAM certificates . The price of CBAM certificates is closely linked to the price of emission allowances in the EU ETS ,

Figure 1 CBAM - basic principle . Source : carboneer .

momentarily around 85 euros phased out ) but also incentivizes per ton of CO 2 e and expected to ambitious carbon prices and range between 100 and 150 euros industrial decarbonization abroad . by 2030 . Any carbon price due for the embedded emissions in CBAM currently covers six EU countries of origin reduces the ETS sectors accounting for number of CBAM certificates to roughly 50 % of emissions in the be surrendered ( cf Figure 1 ). EU ETS : aluminium , cement , This mechanism assimilates the electricity , fertilisers , hydrogen , carbon price due for foreign and and iron and steel . For now , in domestic goods that are sold the iron and steel sector , 478 on the EU market . Compared to CN goods are combined into 8 the system of free allocations , aggregated goods categories CBAM not only increases the EU that share similar production ETS revenues ( free allocations routes , system boundaries of emission allowances are and precursors ( see Table 1 ).

Table 1 Aggregated goods categories and precursors in the iron and steel sector .

Aggregated Goods Category Production Route

Sintered ore Ferro alloys ( FeMn , FeCr , FeNi )

Pig iron Blast furnace route Smelting reduction

DRI ( Direct Reduced Iron )

Relevant precursors

None Sintered ore , if used in the process

Hydrogen , sintered ore , ferro alloys , pig iron / DRI ( the latter if obtained from other installations or production processes and used in the process )

Hydrogen , sintered ore , ferro alloys , pig iron / DRI ( the latter if obtained from other installations or production processes and used in the process )

Green Steel World | Issue 9 | November 2023 15