Since October 1st, 2023, the European Union (EU) has implemented the transitional phase of the Carbon Border Adjustment Mechanism (CBAM), which affects the import of six carbon-intensive products to the EU region: aluminum, iron and steel, cement, fertilizers, hydrogen, and electricity. CBAM is a financial instrument that aims to reduce carbon leakage in the form of levies or tariffs put on products entering the EU. It is hoped that the introduction of CBAM will encourage decarbonization practices in industries outside the EU region while engaging countries to agree on collective climate action in ways that correspond with their capabilities.[1][2]
Industries from the selected sectors that import into the EU, have now to report their GHG emissions. From 2026 onwards they will be obliged to make emission declarations and financial payments for the CBAM goods. Potentially the money could be reimbursed to Indonesia if they have a carbon trading system on the same sectors.[1][2]
Thus this EU regulation could be a challenge but also an opportunity to Indonesia. EU importers would require their non-EU trading partner to calculate the embedded emissions in their products, this transitional period serves as an opportunity for Indonesian producers to establish and adapt their GHG inventory in accordance with the EU’s CBAM reporting standard. Indonesia’s government is also advancing towards a carbon market via their carbon tax policy and establishing carbon trading, which could lead to financial support flowing into the country [1].
With a broad range of services and expertise related to climate change, Tri Hita Consulting is ready to assist your company and the Indonesian government in staying relevant to the continuously evolving sustainability reporting standards. Reach us at info@trihita-consulting.com for more information.
Reference:
[1] https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en
[2] https://energypost.eu/cbam-is-now-active-a-guide-to-what-companies-must-do-to-comply/
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