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PCF 2024.11.04

CBAM Update: EU Considering Expanding CBAM to Downstream Products

If you're a manufacturer that imports to the European Union, you probably know CBAM. But what you might not know is that the European Commission's Directorate-General for Taxation and Customs Union (TAXUD) has just conducted a survey on expanding it to manufactured products outside of its original scope.

CBAM compliance is one of the key reasons our Product Carbon Footprint customers choose Glassdome, so we're here to help you stay ahead of the curve.

Already know all about CBAM as it stands today? Feel free to skip the first section and jump right to the news and references.

What is CBAM?

CBAM stands for the Carbon Border Adjustment Mechanism . The regulation was enacted in 2023 as part of the Fit for 55 package of environmental laws, and is designed to complement the existing EU Emissions Trading System (EU ETS) .

It was developed to deal with “ carbon leakage ” - the practice of producing goods in countries with laxer environmental regulations to save money. A very intentional side effect of the mechanism is to essentially create a tariff on imported CBAM goods, as Europe leads the world in green regulations and energy generation.

CBAM currently covers imported cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen.

Under the mechanism, manufacturers of CBAM goods need to quantify direct emissions from the production process of those goods, including heating and cooling, and indirect emissions from the production of electricity consumed during the production process.

The reported emissions have to be specified for each supplier, each type of CBAM good, and include data on how many CBAM goods were imported and any carbon price paid abroad. That information will also need to be provided on a per-product and per-production installation basis.

Financial penalties for non-compliance include a financial penalty that ranges from €10-50 per ton of unreported emissions. If the failure extends beyond six months, the penalties will grow.

Why expand CBAM?

CBAM was already a major regulatory and administrative lift. So why expand it?

A broad reason is that the EU would like the mechanism to include over half of emissions in EU ETS sectors by 2034.

But the survey had a narrower focus. It specifically looked at the necessity and feasibility of expanding CBAM further down the value chain to manufactured downstream goods.

That is because regulators are worried that customers might move manufacturing and processing operations that use basic CBAM goods as inputs outside of the EU. They could then use those carbon-intensive inputs and import the finished goods to Europe without ever being subject to carbon pricing. That would cause not only carbon leakage, but also a loss of skilled manufacturing jobs to outside countries.

And much like the thought process behind the initial scope of CBAM, expansion will also help EU products compete on a more even pricing playing field with foreign goods.

What industries are being considered for expansion?

Any manufacturer who makes finished goods using CBAM inputs outside of the EU should be concerned about CBAM expansion reaching their company.

Automobiles, agricultural products, construction tools and materials, shipbuilding, and more should look out.

What other developments should my company look out for?

Europe is leading the charge on carbon protectionism. But it won't be alone for long.

The United States has seen a rise in protectionism and tolerance for tariffs from both parties. Green policies can help put a cuddly face on higher consumer prices.

Meanwhile, California is using its economic heft to experiment with bills like SB 253 and SB 261

On the flipside, exporting countries may feel the need to respond with new or more aggressive carbon pricing. Even if they don't get the same level of benefit as wealthy importers, tit-for-tat policies can be popular at home.

What should I do to protect my company?

Smart choices start with informed visibility. That's where a solution like the Glassdome Product Carbon Footprint platform comes in. It gives you real data and benchmarking, updated monthly, along with automated ISO 14067 verified reporting, at a price that doesn't break the bank compared with traditional sustainability consultants.

When you're ready to future-proof your company, it's time to talk to one of our experts .

#PCF#CBAM#CO2emissions
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PCF 2024.10.03

LCA vs. EPD vs. PCF: An Overview

Many companies began their sustainability journey with carefully selected numbers designed to make their products look as green as possible. The natural result was a mass backlash against greenwashing and a demand for rigorous standards for sustainability reporting.

Brands, corporations, and Original Equipment Manufacturers (OEMs) responded by publicly pledging carbon neutrality targets and putting internal policies in place to meet them.

But they have a problem. 80-90% of total emissions are categorized as Scope 3 - they're created in the supply chain, outside of their direct control. That has created a demand for transparency and product-level emission metrics.

This led to the emergence of a jumble of environmental designations; a web of governing bodies and acronyms that confuses as much as it clarifies. That's what we're here to help solve.

Today, three categories of reporting declarations are the leading global methods of reporting verified sustainability claims:

Life Cycle Assessment (LCA): A thorough “cradle-to-grave” study on comprehensive environmental impacts

Environmental Product Declaration (EPD): A document reporting the results of an LCA conducted according to specific, transparent rules called PCRs

Product Carbon Footprint (PCF): The quantified greenhouse gas emissions of a single product across a specific part of its lifecycle

So if you're a company that needs to declare your environmental impact, which standard is right for you?

LCA: Life Cycle Assessment

What is an LCA?

A Life Cycle Assessment is a comprehensive evaluation of the environmental impact of a product or service throughout its entire lifecycle.

As a “cradle-to-grave” assessment, it covers everything from raw material extraction, through manufacturing, transport, use, and disposal or recycling. 

It considers everything from upstream supplier data to downstream waste management. It also goes far beyond just carbon emissions, including things like water and land use and soil, air, and water pollution.

How do I create an LCA?

The four-part LCA process is codified by two international standards - ISO 14040 and ISO 14044

Step 1: Goal and Scope Definition
Clearly define the LCA's purpose, product or service being assessed, functional unit of measurement, and level of detail required. In simple terms, you're choosing the goal, use, audience, and level of review of the assessment.

Step 2: Life Cycle Inventory (LCI)
Compile the necessary data and analyze all of the relevant inputs and outputs. In the end, you should have a full list of everything that goes into and comes out of the product or service, environmentally speaking.

Step 3: Life Cycle Impact Assessment (LCIA)
Classify your resource use and emissions according to their potential environmental impacts. The scope you defined in step 1 will determine how many impact categories you'll need to use. In the end, you will have translated your inventory data into the metrics you need to complete the LCA.

Step 4: Interpretation
Turn your metrics into actionable insights. You need to determine the relative contributions and relevance of your impact sources, and review your data quality and limitations. Then, you can systematically look at ways to reduce your impact without just shifting the burden between phases of the product life cycle. Interpretation helps you use your findings to make smart decisions.

When is an LCA a good idea?

An LCA is comprehensive and somewhat flexible depending on the scope of the assessment, and it adheres to strict ISO standards for transparency and trust. 

If you want to know the full cradle-to-grave scope of a product or service's environmental impact beyond just emissions, it's probably the best tool. The flexibility in definition also means you can expand or contract the scope according to your needs.

It's useful for internal benchmarking, and for giving companies the trusted metrics they need to attract green capital.

When is an LCA a bad idea?

An LCA's inherent flexibility in scope definition means it suffers as an apples-to-apples comparison. What one company may consider comprehensive, another might consider unfinished.

Most LCAs have to rely on inputs from databases (Glassdome uses ecoInvent) for some of their data - that's completely normal. But if that secondary data becomes a large percentage of the data in your report, it can severely cut down on its accuracy.

A good LCA will also require a serious time and financial commitment. It is a complex, time-consuming, and data-intensive process that requires coordination up and down the supply chain. If you’re trying to nimbly respond to regulation or benchmark year-over-year, it might not be a great choice.

EPD: Environmental Product Declaration

What is an EPD?

An Environmental Product Declaration is a document that provides the quantified environmental data of a product based on a set of standards called Product Category Rules (PCRs).

An EPD is based on an LCA that is performed according to the criteria contained in the PCRs the company selects. Or, in less acronym-heavy terms, you assess your environmental impact according to certain rules that you choose, then write it down in a standardized document.

EPDs show the environmental performance of a product in a consistent, credible way and include a broad set of impacts, including carbon emissions, water usage, and air, soil, and water pollution.

The depth of an EPD is defined by the PCRs used. When two EPDs use the same PCRs, they provide a fair product-to-product comparison.

PCRs are based on the ISO 14025 standard and include criteria like:

  • Product category description
  • Goal of the included LCA
  • Functional and required units
  • System boundaries and cut-off criteria
  • Allocation rules
  • Environmental impact categories
  • Product use phase information
  • LCA calculation procedures
  • Data quality requirements
  • …and potentially even more

By so strictly defining each PCR, the standard helps ensure that EPDs are comparable to others within the same product category.

How do you create an EPD?

Creating an EPD is a four-step process, with the four-step LCA creation process nested inside it like a Russian matryoshka doll.

Screenshot 2024-09-27 163452.png

Step 1: Product and PCR Definition
Select and define the product you’re analyzing. Find a relevant available PCR, and, if one is not available, work with an expert to create one.

Step 2: Perform the LCA Study
See the section above. Collect your data into an LCI, perform your LCIA, interpret the results, and report following ISO 14040 guidelines.

Step 3: Write an EPD Report
Review your data quality and create your report following the ISO 14025 guidelines. Depending on your product and the PCRs you’ve chosen, other relevant standards could include ISO 14044 and ISO 21930.

Step 3: Verify and Publish Your EPD
Work with a third party to verify your EPD to ensure its credibility. Publish the EPD on a publicly accessible platform. The verification step is crucial to the EPD’s value as a comparison metric.

When is an EPD a good idea?

EPDs work very well in industries that demand transparency around cradle-to-grave environmental impact and have clear expectations about the PCRs used in the process. 

Good examples include green building rating systems like LEED, public procurement policies, and specific regulations that require detailed environmental disclosures. EPDs can help companies break into and stand out in competitive markets, and support their sustainable marketing claims.

When is an EPD a bad idea?

Since they include an LCA as part of the process, EPDs suffer from similar issues. They are time-consuming to create, can rely too much on averaged-out inputs from databases, and require a large investment of time and expertise.

Industries with fragmented sustainability reporting and no clear standard for PCRs break down the ability to compare EPDs to each other, severely limiting their usefulness.

If that’s the case for you, a good idea could be to work with industry associations to develop an industry standard before committing to an EPD.

PCF: Product Carbon Footprint

What is a PCF?

A Product Carbon Footprint is the sum of the total greenhouse gas emissions created by a product, expressed in CO2 equivalents (CO2e).

Depending on the scope of the study, a PCF can be “cradle-to-gate” (how much carbon was emitted in its production) or “cradle-to-grave” (how much carbon was emitted in its entire lifecycle, including use and disposal).

How do I create a PCF?

PCF is yet another four-step process, in this case codified in ISO 14040 and ISO 14067. It is similar to the LCA process, but only focuses on carbon emissions.

Step 1: Purpose Definition
Lay out why you’re calculating your PCF. Do you want to set an internal benchmark? Are you comparing against peers? Are you doing the study to comply with a customer’s requirements (like Stellantis in the auto industry)? By defining the purpose of your study, you can ensure that the study meets your needs.

Step 2: System Boundary Definition
Determine which processes and uses fall under the scope of this study. Will it be cradle-to-grave, cradle-to-gate, or just gate-to-gate (solely the carbon emissions created inside your factory)? Correctly allocating emissions across a supply chain is crucial to delivering an accurate final PCF.

Step 3: Data Collection
Gather production process and emissions data. For a more accurate final report, use primary data. Where primary data is missing or prohibitively hard to obtain, you can also use default data from databases that contain average emissions factors and modeling information.

Step 4: PCF Calculation
Multiply your activity data by the corresponding emissions factors for each stage in the system boundary. Now you have a baseline to reduce emissions and get more sustainable.

Step 5 (optional): Third-Party Verification
Get your PCF report verified by a third-party organization. You will almost certainly need to do this if you are using your PCF for regulatory compliance, and many manufacturers require verification by their suppliers as well.

When is a PCF a good idea?

Product Carbon Footprint is the only apples-to-apples comparative metric of product-level emissions. It is transparent, robust, and simple to understand. That's why automakers like Stellantis and BMW and regulations like the EU Battery Directive demand them.

While most other carbon footprint metrics only apply to the facility level (ie “how much carbon does my factory emit?”), PCF lets consumers see the impact of the exact product they're buying.

The tight focus on emissions also means it is easier to replicate, monitor, and report back on once the data pipeline is set up. That's especially true when you work with an ISO 14067-verified consulting and software solution like Glassdome.

When is a PCF a bad idea?

PCF is a powerful comparison and benchmarking tool for products. But it's not suitable for everything.

If you are trying to look at your total environmental impact, PCF doesn't cover it. It is strictly an emissions metric.

On the flip side, if all you are trying to do is tick a box for a less-demanding checklist sustainability, a cheaper carbon accounting software might do the trick.

How can I make my processes more sustainable?

Need to comply with government regulations, and show your customers or investors that you're getting greener by the day?

Our Product Carbon Footprint solution is the only real data solution that provides month-over-month updates on your emissions performance. Our consulting and software model, built by manufacturing experts, means you get a pipeline of primary data, and the support you need to interpret it and make improvements using our powerful Continuous Improvement tools . And our ISO 14067 certification means your report is verification-ready, cutting weeks or months out of the process.

Want to learn more? Get in touch . And after you've persevered through this explainer, we promise to keep the three-letter acronyms to a minimum.
 

#PCF#LCA#CO2emissions
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PCF 2024.09.05

EU Battery Regulation: Timeline and System Boundary Requirements

EU Battery Regulation 2023/1542 is a gamechanger for battery makers importing to the EU and the companies they supply.

We’ve covered what these regulations mean for battery manufacturers in depth in a previous Insight.

In this Insight, we want to focus on the timeline. What do battery manufacturers need to act on for the near term, and what do they need to plan for in the long term?

EU Battery Regulation Overview

Before we start, let’s quickly review what EU Battery Regulation 2023/1542 entails:

Objective:
The EU Battery Regulation aims to ensure that batteries placed on the European market are sustainable and safe throughout their life cycle, covering all actors and their activities.

Who is impacted by the EU Battery Regulation?
The Regulation applies to any battery in the EU market with a capacity over 2kWh

What is required?
Article 7, together with Annex II, dictates required carbon footprints of electric vehicle batteries and rechargeable industrial batteries.

When does it start?
The regulation begins to come into force a year from the passage of its implementing act - likely sometime in 2025.

When do I need my Product Carbon Footprint? How about a digital battery passport?

Screenshot 2024-08-02 151627.pngYou need to start with a real-data-based Product Carbon Footprint.

The EU requires the carbon footprint of every EV battery sold in the EU be calculated and made publicly accessible by February 2025. Industrial batteries over 2kWh get an extra year - their deadline is in 2026.

The information in the footprint must be specific to each model and manufacturing plant and collected throughout the value chain. Any changes to materials or facility-level energy mix must be reflected, and carbon offsets cannot be included in the calculation. This will be used by the EU to help sort EV batteries into similar-performing types for easy identification in the future.

For the 2025 and 2026 deadlines, the Product Carbon Footprint just needs to include active material production. This system boundary, from raw materials to the finished product leaving the factory, is often called Cradle to Gate.

In the medium term, you’ll need to start engaging your suppliers and partners. In 2027, the system boundary requirements will expand to cover the four main stages of the battery life cycle:

  • Mineral extraction and pre-processing
  • Battery manufacturing (inclusive of active materials, cell manufacturing, and battery pack assembly)
  • Distribution
  • End-of-life processing and recycling

This full-lifecycle view is called Cradle to Grave.

Check out the infographics below for complete system boundary information.

For EV Batteries:

Screenshot 2024-08-02 151806.pngFor Industrial Batteries:

Screenshot 2024-08-02 151826.pngAlso in 2027, that data will need to be stored in a publicly available Digital Battery Passport. The idea behind the gap is to give companies time to iron out the process before the repercussions for failure get more serious.

(Already thinking about how much work that plant-level, real data-based PCF is going to be to calculate? Glassdome can help. Our PCF platform makes Battery Regulation compliance simple.)

Where should I start?

You should have all of the digital and organizational infrastructure in place to respond as soon as the implementing act is a go.

The most immediate need is a Product Carbon Footprint for each EV and industrial battery you produce. Then you can incorporate that PCF into a Digital Battery Passport.

Step 1: Calculate your PCF
As you can probably gather from the diagrams above, PCF calculation can be incredibly tedious and time-consuming. Setting your system boundaries, poring through dense databases, making sure you’re complying with reams of certification and legal regulations. Glassdome’s PCF solution helps manufacturers simplify PCF calculation and reporting.

Step 2: Verify your PCF
Not just any PCF report will do when you’re trying to comply with regulations. You need to create a report that complies with international standards to achieve your business needs. Glassdome’s PCF solution is ISO 14067 verified by LRQA. That means you’ll be able to get the PCF report you create with Glassdome verified quickly and easily compared to competitor solutions.

Step 3: Publish your PCF
Create a publicly available platform for regulators and customers to view your PCF. Our consultants can help ensure you’re complying with EU regulations.

Step 4: Create your Digital Battery Passport
With a compliant PCF in place, you have a couple of years to build the infrastructure of a digital battery passport for all of your battery models. Glassdome’s plant and product level data makes acquiring real data across multiple models a snap.

Want to learn more? Get in touch with a Glassdome sustainability expert today. Through our work with organizations like Samsung SDI, the Global Battery Alliance, and LG Electronics, we know how to help the world’s leading battery makers prepare for this regulation.

#sustainability#CO2emissions#GHG
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#Scope3#LCA#PCF