The Carbon Border Adjustment Mechanism (CBAM) is one of the many tools Europe is using in its contribution to the fight against climate change.
CBAM is a tariff levied on exports to the European Union (EU), based on carbon emitted during their production. Its main goal is to accelerate the decarbonisation of industries, by establishing a price for carbon while limiting businesses from shifting production to countries with more lenient climate regulations.
TT, like many other countries that export to the EU, will have to begin reporting on the amount of carbon emitted in manufacturing products from January 2025.
The EU is not the only region taking this route, as the UK is also developing its own carbon policies with the aim of pricing carbon and bringing its region to net zero.
A significant number of TT’s exports are energy-based and have significant carbon footprints.
TT, using its natural gas resources, became one the highest exporters of ammonia in the world.
At the Global Climate Change Alliance (GCCA) held at the Trinidad Hilton, Port of Spain, on November 29, EU Ambassador Peter Cavendish pointed out that TT’s exports to Europe amount to $33.8 billion a year, and TT is the second-highest exporter of ammonia in the world to Europe.
Cavendish said Europe has spent €1 billion ($7.1 billion) in development funds in clean-energy projects alone.
He said the EU was part of the installation of 12 solar panel systems, including the solar park in Piarco, which was commissioned in July.
He said the solar park provides four per cent of the airport’s energy needs.
In a discussion on catalysing climate change at the forum, Dr Jaymeion Jagessar, a project researcher at UWI pointed out that, given the amount of energy-based exports TT makes, the EU CBAM and other carbon-based tariffs will have a significant effect on TT’s energy industries.
TT and CBAM
The CBAM will initially apply to imports of particular goods which are significantly carbon-intensive. These include cement, iron and steel, aluminium, fertilisers, electricity and hydrogen.
The reporting phase in January is just part of the plans for CBAM implementation.
The objective of the reporting period is to act as a transitional phase and learning period for importers and producers of carbon-intensive products during which
importers of goods in the scope of the CBAM regulations can assess and report on the greenhouse gas (GHG) emissions from the manufacture of their goods.
Indirect emissions will also be covered after the transitional period, for sectors such as cement and fertilisers, through a methodology outlined in an implementing regulation published on August 2023.
For example, petrochemicals, such as ammonia are covered under the CBAM regulations under the manufacture of fertilisers.
CBAM regulations dictate that even if the ammonia is not used for fertiliser it is still covered under the category.
Jagessar, in his presentation, said exports to Europe account for around 12-14 per cent of TT’s total exports, more than 90 p
