Tag Archive for: Descarbonización

What is the carbon border adjustment mechanism and why is it so controversial?

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  • The EU proposes to apply a tariff on imported carbon-intensive products.

  • The measure (CBAM) will be implemented in two phases, will come into force in 2026 and will initially apply to imports in sectors such as cement, hydrogen and electricity.

As part of the fight against climate change, the European Union (EU) has launched what it considers to be one of the key instruments within the European Green Pact: The Carbon Border Adjustment Mechanism, also known as CBAM. It is an essential part of the “Fit for 55” measures package, a set of proposals to revise and update EU legislation to ensure that the EU’s intermediate target of reducing greenhouse gas (GHG) emissions by 55% by 2030 is met.

This proposal has already been described as “bold, complicated and controversial” and several countries have already expressed concerns about its implementation. The measure will undoubtedly disrupt trade relations between the EU and its partners, but let’s look at exactly what it is.

The CBAM is intended to be implemented in parallel to the EU Emissions Trading Scheme (ETS) to counter the so-called ‘carbon-leakage’. Based on the “cap-and-trade” principle, the ETS sets a price on carbon and, each year, industries covered by the ETS must buy allowances corresponding to their GHG emissions. These allowances are limited, and each year the limit is lowered with the aim of creating financial incentives for companies to reduce their emissions.

Risk of carbon-leakage

The issue is that this could lead to what is known as carbon leakage: although some companies, which production processes are high in GHG emissions, are allocated free allowances to support their competitiveness, these will be progressively phased out, raising the risk that they may consider moving their production to other countries outside the EU in order to avoid the increased costs associated with the ETS, importing products at a more advantageous price to the detriment of the environment.  

This is where the CBAM applies. This is a tariff on carbon-intensive products imported to the EU to balance by equalising the carbon price of imports with the carbon price of EU products. The phasing out of the free allocation of allowances under the ETS will take place in parallel with the introduction of the CBAM mechanism, ensuring coherence between climate objectives and trade policy.

The CBAM will be implemented in two phases, so that before the entry into operation of the final version, there will be a transitional period with the following objectives:

  • To serve as a learning curve for importers, producers and the authorities involved.
  • To allow the collection of info
     rmation on GHG emissions to help refine the methodologies for calculating these emissions.
  • Align the price of carbon produced in the EU with that of imported goods.

This first transitional period will run from 1 October 2023 to 31 December 2025, and initially applies only to imports from the sectors most at risk of carbon leakage: cement, iron/steel, aluminium, hydrogen, fertilisers and electricity (although it has already been agreed that this will be extended to more products, such as chemicals and polymers). The specific goods that are affected by CBAM are detailed in Annexes I and II of Implementing Regulation (EU) 2023/1773, where the CN codes for all affected materials are listed.

In addition, the obligations arising from the importation of these goods are also set out:

  1. Register in the transitional CBAM Register, which allows communication between all parties to the mechanism (European Commission, competent and customs authorities, traders and reporting companies).
  2. Submit CBAM reports on a quarterly basis. Importers of goods (or their indirect customs representatives) are responsible for reporting the GHG emissions implicit in their imports. The report must be submitted no later than one month after the end of the quarter, and emissions calculations can be made in 3 ways:
    1. Using default reference values published by the European Commission. This method can only be used to report 100% of the implied emissions until July 2024; it can be used for the remaining transitional period to report up to 20% of the implied emissions.
    2. Using an equivalent methodology that considers either a carbon pricing system, a mandatory emissions monitoring system, or a monitoring system that may include verification by an accredited third party (always where the installation is located). This method may be used for imports until December 2024.
    3. Using the new methodology provided by the EU. It may be applied throughout the transitional period.

No payment or financial adjustment will be required during this first phase.

Once the mechanism fully enters into force on 1 January 2026, importers will be obliged to purchase the corresponding CBAM certificates. It should be noted that this mechanism is not a tax to be paid on import, but that the purchase of the certificates must be acquired prior to the importation of the products subject to CBAM. If the importer can prove that a carbon price has already been paid during the production of the imported goods, this amount can be deducted from the corresponding amount to be redeemed at CBAM.

Subsequently, by 31 May each year at the latest, the importer or his representative must submit an annual report, stating the goods imported in the previous calendar year and their corresponding emissions, as well as the number of CBAM certificates purchased for that year.

Antía Míguez, Technologist at Genesal Energy

Energy transition and decarbonisation, an opportunity to seek sustainable industrial models.

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One of humanity’s greatest challenges is the fight against climate change, global greenhouse gas (GHG) emissions need to reach a ceiling as soon as possible, but this implies carrying out a process of decarbonisation of current socio-economic systems and “transitioning” towards new efficient models in the use of resources, from raw materials to energy fluxes, based on clean and competitive energies. Genesal Energy is well aware of this.

How to perform the transition?

According to the Intergovernmental Panel on Climate Change (IPCC), it is not enough to replace current energy infrastructures, dependent on fossil fuels, with other renewable and sustainable ones. It is also necessary to implement energy efficiency measures which allow more than just reducing consumption. As is often said colloquially, “the best energy is the energy that is not consumed”.

In this context, the industrial sector must play an active role in the process of change. Genesal Energy is doing so: We have launched OGGY (Off Grid Genesal energY), our own energy management system that allows real-time monitoring of both production and energy consumption, deciding at all times what to do with these flows to make the most efficient use of them: store them in the battery system, consume them at the company’s facilities, discharge them into the grid or a combination of the previous options.


This system consists of three main blocks (Figure 1):

  • The OGGY is capable of controlling different sources of energy generation, including the conventional electricity grid. In the specific case of the application at Genesal Energy, the sources are the following:
    • Two photovoltaic building façades on our HQ warehouses (Illustration 2), which occupy a surface area of 111 m2. They are made up of 93 units of the latest generation crystal-silicon photovoltaic glass, with seven different sizes to suit the design of the original façade. In total, the installed power is 13.1kWp, which allows for a generation of 11 000 kWh per year. These panels are not installed on top of the old façade, they are integrated into it, allowing for better thermal insulation of the buildings.

    • This means that we haven’t just focused on renewable self-consumption, but it has also been possible to reduce cooling needs by up to 50% reducing the air conditioning of the buildings. This installation alone – not mentioning the rest of the energy system – is going to avoid the emission of 245 tonnes of CO2 in 35 years, the equivalent of a saving of 661 barrels of oil per square metre.
    • In addition to the façades, 126 photovoltaic panels with an output of 57.33 kW have also been installed on the roof of the company’s warehouses. These panels save more than 20 tonnes of CO2 per year.
    • Testing of generators at the company’s facilities. All generators sold by Genesal Energy are tested at its facilities before being sent to the customer. This allows us to offer a top-quality warranty, but it also means consumption of fossil fuel. In accordance with the principles set out by the circular economy, the company has decided to reuse this energy by reintroducing it back into the value chain. The OGGY stores a percentage of the energy generated in these tests.
    • Although the amount of energy generated in the facilities Genesal Energy could make us self-sufficient, we have maintained the connection to the conventional electricity grid in case of system failures.
  • The core, and the most important part, is the energy management algorithm or EMS, which is responsible for controlling all energy fluxes. This energy system continuously analyses the status of generation, storage and consumption in order to determine the system’s working profile at any given moment.
    In addition, it considers variables external to the system, such as the weather forecast (to predict what the energy generated by the photovoltaic installation will be) or the price of electricity in real time (deciding whether to feed the energy into the grid or store it in the battery system).

The integration between the OGGY system and the generating sources is performed through MODBUS, an open communication protocol used to transmit information through serial networks between different electronic devices. This is essential for the system to be able to properly manage all the fluxes and where they are directed to.

As for the storage system, it consists of a rack of lithium batteries with a total power of 92 kWh, grouped into 14 modules.

  • Finally, there are the energy consumption points. In the case of Genesal Energy, these are the ones in the factory itself and the offices.

 

All Genesal’s actions, research and projects developed in the sustainability field are based on the absolute conviction that we are doing the right thing. The industrial sector must understand the processes of ecological transition and decarbonisation as opportunities to promote its own transformation towards sustainable models. Comprehensive energy management systems such as OGGY are key to this new scenario.

Antía Míguez, technologist at Genesal Energy