Carbon Accounting and EU Carbon Border Tax 2025
Table of Contents
ToggleCarbon Accounting and Carbon Border Tax
European Union 2025
Analysis and implications for businesses
What is Carbon Accounting?
Carbon accounting (or greenhouse gas accounting) is the process of quantifying an organization's impact on the climate by calculating the greenhouse gases it emits, i.e., its carbon footprint.
Physical Carbon Accounting
- Measures direct and indirect GHG emissions
- Includes Scopes 1, 2 and 3
- Identifies activities generating the most emissions
Financial Carbon Accounting
- Assigns financial value to carbon produced or absorbed
- Allows earning and trading carbon credits
- Facilitates participation in carbon markets
Carbon accounting has become an essential tool for businesses in 2025
Benefits of Carbon Accounting
Economic Benefits
- Identify high-consumption operations
- Reduce energy waste
- Reduce costs through efficient energy management
Social Benefits
- Transparency in carbon reporting
- Attract investors, customers and talent
- Facilitate access to green financing
Environmental Benefits
- Track and reduce GHG emissions
- Contribute to the fight against global warming
- Support the transition to a net-zero future
Carbon accounting has become an essential tool for businesses in 2025
GHG Emission Calculation Method
Fundamental Formula
Activity Data
Represents the quantity of energy or resources consumed.
- Examples: kWh of electricity, liters of fuel, tons of coal
- Basis for emission calculations
Emission Factors
Quantify the rate of GHG emissions per unit of activity.
- Based on reliable international databases
- Examples: emissions per kWh of electricity, per liter of fuel
Emission factors are generally based on International Energy Agency (IEA) data
The Three Emission Scopes
The Greenhouse Gas Protocol establishes a classification of emissions into three distinct scopes to facilitate their measurement and management.
Scope 1
Direct emissions from sources owned or controlled by the organization.
- Fuel combustion in facilities
- Emissions from fleet vehicles
- Other direct sources of the organization
Scope 2
Indirect emissions related to purchased energy consumption.
- Electricity used
- Heating and cooling
- Other forms of purchased energy
Scope 3
Other indirect emissions along the value chain.
- Transport of goods
- Suppliers
- Use of sold products
- Business travel
Scope 3 is gaining importance under new European regulations
EU CBAM: Presentation and Objectives
What is CBAM?
The Carbon Border Adjustment Mechanism (CBAM) is an essential component of the EU's "Fit for 55" climate package. It aims to counter "carbon leakage" by applying a carbon price to imported goods.
Main Objectives
Prevent carbon leakage
Prevent companies from relocating production to countries with less strict environmental regulations
Harmonize carbon costs
Equalize the carbon cost between products manufactured within the EU and those imported
Promote clean technologies
Encourage foreign producers to adopt cleaner technologies
Implementation
Full operational phase
CBAM will enter its full operational phase in 2025
Sectors concerned
Initially covers steel, cement, aluminum, fertilizers, hydrogen and electricity sectors
Future evolution
Planned expansion to other sectors by 2030, aligned with EU climate neutrality objectives for 2050
CBAM redefines sustainability and global trade strategies
How CBAM Works
Operating principle
CBAM applies a carbon price to goods imported into the EU, based on the greenhouse gas emissions intrinsic to their production. It aims to harmonize the carbon cost between products manufactured within the EU and those imported.
Initially covered sectors
Expected evolution
CBAM will be extended to other sectors by 2030, strengthening the alignment of global trade with EU climate neutrality objectives.
ETS vs Carbon Tax
Comparison of climate policy tools and their pricing mechanisms
Emissions Trading System (ETS)
Mechanism
Sets a total emissions cap and allows quota trading
Certainty
Ensures certainty on the total quantity of emissions reduced
Flexibility
Companies can buy or sell quotas, encouraging innovation
Carbon Tax
Mechanism
Sets a direct price per ton of CO₂ emitted
Certainty
Ensures certainty on the carbon price
Flexibility
Companies can choose to pay the tax or reduce their emissions
Impact on emissions
Does not impose a total cap, emissions can increase if companies are willing to pay
ETS-CBAM Synergy
ETS
EU Emissions Trading System
Synergy
CBAM
Carbon Border Adjustment Mechanism
Carbon cost equivalence
CBAM ensures that carbon costs are equivalent for producers based in the EU and those located outside the EU.
Prevention of "carbon leakage"
Prevents companies from relocating their production to countries with less strict environmental regulations.
Encouragement of innovation
CBAM encourages exporters to the EU to adopt cleaner technologies and reduce their emissions.
Global influence
Exerts positive influence on the environmental practices of international trading partners.
Together, ETS and CBAM create an environment where sustainability is rewarded and pollution penalized, consolidating the EU's position as a global leader in carbon regulation.
Conclusions and Frequently Asked Questions
2025 Issues Summary
Carbon accounting has become a crucial tool for businesses in 2025, allowing them to measure and reduce their greenhouse gas emissions. With the entry into force of CBAM (Carbon Border Adjustment Mechanism), this practice fits into a commercial landscape where environmental compliance and competitiveness are linked, pushing companies towards sustainable strategies.
Frequently Asked Questions
What is the EU Carbon Border Tax (CBAM)?
CBAM is a mechanism that taxes imported goods based on their carbon emissions, ensuring that EU industries are not disadvantaged by foreign competitors.
How does carbon accounting help companies?
It allows companies to measure and manage their carbon footprint, comply with regulatory requirements, and attract committed investors.
Which industries are affected by the EU Carbon Border Tax?
Initially, CBAM applies to steel, cement, aluminum, fertilizers, hydrogen and electricity, with an extension planned to other sectors by 2030.
Is carbon accounting mandatory in 2025?
Although not legally mandatory for all companies, most large organizations must disclose their carbon emissions and climate risks under the CSRD Directive.
