The Carbon Border Adjustment Mechanism (CBAM)
11 min
Level
In this article we’ll explore what the CBAM is, why it’s been created, and what importers need to know ahead of its introduction.
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ESG / CSR
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What is Carbon Management?
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Carbon management is a growing field for addressing the contribution businesses have to climate change and reducing greenhouse gas emissions.
The approach is helpful for environmental management, because it applies a practical lens to an often challenging problem of global warming.
Finding the most straightforward, effective strategies for businesses reducing emissions requires measurement, accuracy, a combination of technological and soft skills, and a commitment to becoming part of the solution to climate change.
In this article, we'll explain what carbon management is, why it's important, and how your company can get started.
What is carbon management?
“ Carbon management is an organized approach to gain the strategic advantages of CO₂ emissions reductions. Carbon management helps organizations stay focused on achieving their targets to reduce CO₂ emissions and their use of fossil fuels. ”
With mandatory reporting requirements in the UK and EU, and stakeholder pressure for businesses to set goals to reduce emissions and implement carbon management helps businesses, measure, track, and manage emissions in an organized way.
💡 Carbon management combines practical, cost-effective approaches to reducing annual greenhouse gas (GHG) emissions in ways that enhance environmental performance.
Carbon management is useful for identifying useful carbon dioxide (CO₂) emissions reduction strategies for cutting back the annual emissions business report to stakeholders in their CSR reports.
There are a wide range of strategies employed in carbon management: energy efficiency, low-carbon fuel substitution, renewable energy certificates, life cycle analysis, and the use of new technologies like carbon capture, otherwise known as direct air capture – are all strategies that can help businesses lower their reported CO₂ emissions.
👉 However, not all companies can afford carbon capture and storage systems – meaning that some business leaders may need to re-evaluate their industrial processes and use critical thinking to employ effective carbon management strategies.
Science and research are seeking new ideas for decarbonization technologies are being made all of the time to improve upon sustainable development, but the good news is – emissions reductions can already be made through the implementation of one or more of these broad categories.
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Why is carbon management important?
Carbon management does not just look at the problem of carbon emissions added to the atmosphere each year, it supports the development of technologies and approaches to address the legacy emissions and hard to abate industrial emissions.
Even if we completely reduce new generation of CO₂ emissions to zero, carbon management will support the removal of the build-up of historic CO₂ emissions and usage of fossil fuels.
Within organizations, carbon management goes beyond technology to include policies, training, and techniques that reduce CO₂ emissions strategically. With a managerial approach to the problem of CO₂ emissions, organizations can avoid a disorderly and confusing process to alter their systems.
👉 In other words, technology development can help make a low carbon future a reality.
Luckily, there are multiple pathways of improvement. In the event of CO₂ emissions reduction, carbon management identifies the pathways of least resistance.
Importance of Carbon Management
| Reason | Description |
|---|---|
| Helps Engage Stakeholders | Effective carbon management demonstrates a company's commitment to environmental sustainability, which can engage and motivate employees, customers, and investors. It shows that the company is proactive in addressing climate change, which can enhance its reputation and stakeholder trust. |
| Attract New Customers and Investors | Many consumers and investors are becoming more environmentally conscious and prefer to support companies that prioritize sustainability. By implementing carbon management practices, businesses can attract a new segment of eco-conscious customers and investors, thereby expanding their market reach and financial opportunities. |
| Avoid Legal Fines from Lack of Compliance | Regulations on carbon emissions are becoming stricter globally. Proper carbon management ensures compliance with these regulations, helping companies avoid legal fines and penalties. Staying ahead of regulatory requirements can also provide a competitive advantage. |
| Long-Term and Sustainable Business Growth | Managing carbon emissions can lead to cost savings through improved energy efficiency and reduced waste. These savings can be reinvested into the business for further growth. Additionally, sustainable practices can open up new business opportunities and markets that are increasingly favoring eco-friendly products and services. |
Manage your company’s carbon emissions: calculate your carbon footprint
Climate change will fundamentally shape the course of business over the next few decades, so it is important to stay alert regarding the use of natural gas, GHG emissions, energy costs, and climate change overall.
Carbon credentials demonstrate an organization’s legitimate approach to a globally acknowledged problem: carbon emissions are too high, and science, resources, research, and new ideas need to be sought out for the sake of the climate and reducing harmful greenhouse gases and methane emissions.
💡 Every carbon management system starts with collecting the data on CO₂ emissions. Consider this data a starting point to slice down the numbers towards zero and work towards net reduction.
Carbon Measuring and Reporting
The problem is not just that businesses have not set net zero targets, the issue is many have not even calculated their baseline of GHG emissions. Remember, a CO₂ emissions baseline is the starting point which enables carbon management in the first place.
“ With a baseline, your organization can effectively measure progress relative to the starting point. This helps you scope out actions that could immediately minimize your CO₂ footprint and allow for cost savings, or even reduce costs – while also improving efficiency. ”
The baseline also helps organizations develop strategies with a timeline, budget, and KPIs – like any management problem in an organization. Your carbon dashboard is a communication tool for benchmarking performance, highlighting progress, and building trust.
What is a carbon footprint?
“Carbon footprint” is a popular sustainability buzzword, but some people may not understand its meaning. The phrase refers to the sum of greenhouse gases (carbon dioxide, nitrous dioxide, methane, and HFCs) which our carbon intensive activities and other projects produce.
Carbon footprints can be calculated for individuals, businesses, cities, or even countries. On average, people in the US have a carbon footprint of 16 tons of CO₂ emissions per year. This is much higher than the global annual average of 4 tons.
Even this average, however, is still too high to limit global emissions to less than 2℃ by 2100. The global average footprint should drop to 2 tons or less per year by 2050.
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💡 Businesses have play a central role in helping to reduce the amount of greenhouse gas emissions in the atmosphere, because a large amount of emissions occur during the production and distribution of goods and services, which individuals cannot change.
Businesses are also responsible for the way products are designed. By designing products and services which effectively encourage emissions reducing behaviors, businesses can manage carbon to cut back on emissions inefficiencies.
How can you calculate the carbon footprint of your company?
You may have seen carbon footprint calculators online which quickly help you audit your lifestyle for its CO₂ emissions impact. However, these calculators only scratch the surface. Greenly supports its clients with a range of services that are useful for carbon measurement and management.
Carbon footprints
These assess the total level of CO₂ emissions per year for a range of business activities. A carbon footprint measurement converts the activities of your organization into a tangible set of facts and figures.
These activities may fall within different Scopes. The 3 main Scopes worth addressing are Scope 1 (operations), Scope 2 (off-site energy used in operations), and Scope 3 (upstream supply-chain and downstream consumer value chain emissions).
Most emissions fall under the Scope 3 category for businesses, and reporting recommendations are increasingly concerned with these emissions.
Assessing the carbon footprint of Scope 3 emissions often benefits from the support of a partnering organization familiar with the latest measurement techniques.
Overview of Greenly's interface for carbon footprint
Life cycle analysis
Unlike a carbon footprint, which assesses organizational activities for a given period of time, life cycle analysis looks at how CO₂ emissions and other environmental impacts occur across the useful life of a product or service.
Let’s use a product as an example. Before a product becomes useful to a customer, it starts out as nothing more than a bunch of raw materials. These require energy and an assembly line to produce. Next, products should be shipped to a warehouse, which requires gas, fuel and other resources.
After the item is sold, a consumer will use the item for a period of time. If the item requires energy or fuel to use, it will produce emissions in the hands of the consumer. This is an example of when carbon management technologies cannot reduce greenhouse gas emissions, and carbon management is now the responsibility of the consumer.
After this, the item will either get resold, recycled, or disposed of. At that point, additional carbon emissions may be produced in either one of these stages.
👉 Therefore, a life cycle analysis produces a flow chart showing how a product is made, transported, used, and eventually disposed of. Along each step of the flow chart there are related CO₂ emissions to measure and assess. We can help with life cycle analysis at Greenly.
Overview of Greenly's interface for life cycle analysis
Carbon offsetting
Carbon emissions can be strategically reduced by an organization with the help of carbon offsets. These offsets may come in the form of a verified project that uses natural forests, soils, or the ocean to sink existing CO₂ emissions.
Alternatively, it may also address potential emissions. If you can help people avoid carbon emissions they would normally produce, you can effectively cut down on total CO₂ emissions for a period of time. This could be achieved by investing in renewable energy projects such as power plants or further carbon management research.
Organizations which subtract more CO₂ from their total CO₂ emissions than they produce achieve “climate positive” operations. Wouldn’t it be great to benefit the earth more than enough to compensate for your emissions?
💡 Remember, carbon offsetting shouldn't be used in place of an effective carbon reduction strategy – but a supplement to reduce the leftover emissions which prove more difficult to avoid.
5 tips for an efficient carbon management
1. Certify your use of Renewable Energy
Renewable energy sources provide low-carbon opportunities for energy consumption. Renewable energy sources include solar, wind, hydropower, geothermal, power plants, and a range of other opportunities. Most of these energy sources produce no CO₂ emissions once they are operational, proving that power generation doesn't need to create excessive carbon emissions.
When a company reports its energy and fuel mix in a carbon footprint assessment, each type of energy is associated with a different level of CO₂ emissions. By sourcing renewable energy, a business can report zero emissions in this category and improve their carbon management.
So how should a company verify its use of renewable energy?
The answer varies depending on which country or region an organization operates in. Here are a few different opportunities:
- RECs - In the United States, companies can purchase Renewable Energy Credits to match their use of energy, even if they don’t operate in an area with enough publicly available renewable energy. One renewable energy credit equals 1 MWh of electricity.
- REGOs – In the UK, Renewable Energy Guarantees of Origin verifies a company has used energy from 100% renewable sources.
- RE100 is an initiative for companies who wish to commit to sourcing 100% of their electricity from renewable sources.
👉 Aside from these certificates, companies can also join one of several initiatives to demonstrate their support for expanding renewable energy sources.
Currently, the initiative includes 418 companies which source about 45% of their electricity needs from renewable sources. As of 2023, 76 of these companies have reported 100% renewable energy sourcing.
24/7 Carbon Free Energy - The UN created its 24/7 Carbon Free Energy Compact to encourage governments, investors, and utilities to supply decarbonized energy 24 hours a day, 7 days a week. This initiative supports expanding full access to clean energy sources.
2. Cut back on travel-based emissions
The COVID-19 pandemic caused many workplaces to expand their digital and remote working systems out of necessity. Lockdowns during the peak of the Covid-19 pandemic meant that people couldn't easily travel for conferences or work in shared office spaces.
As a result, a wide range of digital opportunities became more widely used: Zoom, Skype, Slack, and Clubhouse offered networking opportunities both within organizations and externally.
From a carbon footprint perspective, digital working opportunities significantly cut down on the number of work commutes and air miles spent on travel for work purposes. Even after lockdowns have been lifted, most conferences and events still offer reduced-rate entry for digital attendees.
For hard-to-reduce air miles, companies should be aware that every passenger seat type has a different carbon footprint. According to the UK Defra Carbon Factors, first-class emissions are 0.60kg CO₂e, business class emissions are 0.43kg CO₂e, and economy class emissions are just 0.15 CO₂e.
Employee commutes aren’t the only thing to consider. Companies with fleets of vehicles can reduce their CO₂ emissions by switching to electric vehicles, hybrid, or alternative fuel-source vehicles.
👉 It’s important to think beyond road-based vehicles, too. This includes fleets of lawn mowers, utility vehicles, forklifts, and other equipment used in the operations of a business.
The driving habits of your employees can also make a considerable difference in terms of the overall CO₂ footprint of a company. To address this, training on low-emissions driving styles, ride sharing incentives, and route optimization can all improve a company’s transportation-based emissions.
Finally, promoting alternatives to internal combustion engine vehicles such as trains, bikes, and metro all offer carbon management techniques worth exploring.
3. Optimize systems for energy efficiency
There are literally hundreds of ways businesses can optimize their energy efficiency. The best part about energy efficiency is it saves money! Until you undergo a carbon footprint assessment, these opportunities might not seem obvious.
Retrofits, technology swaps, smart technologies, and operational and behavior changes can all improve energy efficiency metrics. This is why carbon management benefits from thinking outside the box.
For starters, lighting is a great way to cut back. LED lighting is an energy efficiency miracle that not nearly enough businesses have tapped into. Changing window glazing, motion sensors, smart timers, dimming lights, and even improving access to natural light can also cut down on electricity costs.
Next, consider your building’s insulation, air flow, and seasonal shifts to optimize the use of natural resources and insulation, while turning off excess power for areas not in use. Swap out energy intensive appliances and equipment with energy saving alternatives.
💡 Smart technologies and thermostats can help you track, monitor, and operate your buildings more efficiently.
4. Take your heating and cooling to the next level
Heating and cooling contribute significant amounts of CO₂ emissions. One of the most impactful green building strategies you can make is switching from a natural gas heater or boiler heater to an energy efficient heat pump.
However, this will require an upfront cost. Researching incentives from your local government may help you finance the shift.
Operational adjustments can go a long way to cut down on the excess. Smart thermostats can adjust the indoor temperature according to the outside temperature automatically and shift temperature during day and nighttime.
To reduce cooling costs, inventive approaches like planting trees near buildings, installing shading, increasing natural airflow, or painting a roof with reflective paint can all cut down on indoor temperatures in summer.
Data storage centers often use excess cooling to keep the servers from overheating. However, improving the accuracy of the temperature in the center can cut down on unnecessary cooling costs. This could mean raising the ambient temperature a few degrees.
5. Reduce, reuse, recycle, and more
Every item in your office has a life cycle which could prematurely send materials to the landfill. Procurement strategies have proven effective in reducing the amount of unnecessary waste created.
This can include purchasing recycled or used goods, or leasing office furniture. Circular business models that lease equipment and offer repair and maintenance services can extend the useful lifespan of items.
All of the small supplies that are quickly used up in an office such as food, drinks, paper, or other supplies can all be optimized for low-waste alternatives. Composting, food donations, and storing files electronically can all minimize waste from these supplies.
Electronics contribute significant waste each year, so ensuring that your company prioritizes recycling e-waste and repair services is another way to minimize waste.
💡 Every item that is sent to the landfill adds to your carbon footprint, making it important to practice green living whenever possible.
What about Greenly?
Greenly helps businesses conduct carbon footprint assessments and develop carbon management strategies to draw down emissions.
Click here to learn more about Greenly and how we can help you reduce your carbon footprint.
Don't wait any longer, take the first step towards reducing your carbon footprint by requesting a free and non-binding demo with one of our experts today and finding the solution that best fits your business needs.
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