The European Union (EU) has reportedly sent a list of energy auditors and accredited verifiers to various steel mills and manufacturing units of India so as to carry out emission audits across products in the wake of the Carbon Border Adjustment Mechanism (CBAM) entering the transition phase.
The list varies between 4 and 15 auditor names as per industry sources, and some companies have started undergoing emission audits for their facilities. Contracts (export) are being reworked too.
Names doing rounds across the industry are Sphera, SIPM, IRQA, BV, Greenfish, McKinzie & Baker, among others.
Review of facilities are to be done quarterly and costs incurred on such audits go into the profit and loss accounts of the company (exporter). There is no provision of refund or write-back of these expenses, as of yet.
Also read: All you want to know about the EU carbon tax wrangle
Across different sectors such as steel, stainless steel, aluminium, etc, the first shipment (post transition phase) is expected to enter European Union around end-October.
“We received some names and appointed a couple of them for review at our facilities. Reports have come in. And as shipments to EU start, we will send them along,” an official at a major steel mill told businessline .
Under the current CBAM requirements, which came into effect October 1 onwards, companies exporting to EU will have to mandatorily declare the carbon emissions in their products shipped on a quarterly basis.
The declarations on carbon emissions can be made either along with the shipments or be sent at the time EU importers pick up deliveries from various ports, said the official.
Default values
Some steel mills are working with top-tier law firms, on their own, to word future export contracts. The law firms will also go ahead with green house gas emissions monitoring and calculation systems under EU standards.
In the absence of Indian systems being aligned towards EU, some of the firms have suggested that “Indian exporters rely on default values to be published by the European Commission for their reporting purposes”.
Also read: Global steel demand likely to rise 1.8% in 2023, 1.9% in 2024: Worldsteel
“Information that is potentially sensitive have been marked out and our clients informed. These would be additional information that exporters need to furnish to their customers,” one of the law firms said. These relate to location information, high-level production information (such as the share of scrap steel used, etc).
Indian exporters have also been suggested to refrain from mentioning specific timelines on providing green house gas emission data. Rather it has been suggested that generic terms like “short-term or medium-term” be used.
“Since our carbon emission range is within the default values given by EU, we are going with these at the moment. As and when new values are determined or announced, we will take a call accordingly,” another steel exporter said.
Concerns persist
A senior government official aware of the ongoing processes told businessline, that energy auditor’s report will have information like “comprehensive emissions data — such as the quantity of goods, totally embedded emissions, indirect emissions and the carbon price in the country of origin”. These will be reported in the EU format quarterly from now on.
The problem arises for smaller Indian exporters, as they will need to persuade the larger producers to provide them with the data required by the EU.
Also read: Lower cost will boost steel companies’ profit in Sept quarter
At a recent stakeholder meeting called by one of the ministries, the industry participants referred to the absence of Indian verifiers from the list (and the fact that smaller firms would not have necessary budgets or access to global bigwigs suggested by EU). At the same time, it was mentioned that there needs to be more clarity on passing of “trade or business-sensitive information” and there needs to be guarantees of such information “not being leaked to competition”.
The official added that concerns at both bilateral and multilateral levels with the EU has been raised. And India is weighing options like taxing CBAM “at source”.
“Other countries have raised concerns to the EU on its proposal for the implementation of CBAM mechanism, “ the official said.
China has already raised its worries with the World Trade Organization, claiming that the mechanism is a protectionist measure that creates green barriers to trade.
Asia is responsible for around half of all greenhouse gas emissions, which are still rising at a faster rate than any other region, according to the International Energy Agency.
