Companies importing hydrogen and ammonia into the EU will now have to report their greenhouse gas emissions (both direct and indirect) to the European Commission on a quarterly basis, after the initial phase of the bloc’s Carbon Border Adjustment Mechanism (CBAM) came into effect on Sunday.
Importers of ammonia-based chemicals — namely nitric acid, urea and “mixed fertilisers” (see below) — as well as direct-reduced iron made using H2, also have to comply with the new regulations.
The CBAM is the EU’s “landmark tool to put a fair price on the carbon emitted during the production of carbon intensive goods that are entering the EU, and to encourage cleaner industrial production in non-EU countries”.
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The mechanism — which introduces a tax on imports of cement, iron & steel, aluminium, electricity, hydrogen and fertilisers, based on the CO2 emitted during their manufacturing — is designed to prevent so-called “carbon leakage”.
“Carbon leakage occurs when companies based in the EU move carbon-intensive production abroad to countries where less stringent climate policies are in place than in the EU, or when EU products get replaced by more carbon-intensive imports,” the European Commission explains.
However, the actual carbon border tariffs will not have to be paid until 1 January 2026.
“The objective of this transition period is to serve as a pilot and learning period for all stakeholders (importers, producers and authorities) and to collect useful information on embedded emissions to refine the methodology for the definitive period,” the commission states.
“The gradual phasing in of CBAM over time will also allow for a careful, predictable and proportionate transition for EU and non-EU businesses, as well as for public authorities.”
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Direct greenhouse gas emissions are those produced during manufacturing, while indirect emissions come from the electricity consumed in the installation of equipment or production of goods. Emissions from the transportation of goods to the EU, and the end-use/final disposal of the products, are not included.
The EU plans to import hydrogen and its derivatives via a European Hydrogen Bank-based auction system, as well as the H2Global tender scheme initiated by Germany, which is now being rolled out to other member states.
It is also reportedly considering extending its joint gas purchasing scheme — set up as an emergency measure in April 2022 to replace Russian supplies — to green hydrogen.
EU hydrogen and fertiliser imports today
The EU plans to import 10 million tonnes of green hydrogen by 2030, but current imports of pure H2 are minimal.
According to the World Integrated Trade Solution (WITS) — a software system developed by the World Bank in collaboration with the UN — the EU imported just over 675,000 cubic metres (at atmospheric pressure) from outside the bloc in 2022.
This amounts to about 60 tonnes — which primarily came from the UK, Switzerland and Serbia. About 2.5 tonnes of H2 arrived from outside Europe (mainly the US and Japan), probably in small cylinders on standard container ships.
However, about 4.3 million tonnes of pure (anhydrous) ammonia were imported into the EU last year, according to WITS, with the largest exporters being Algeria, Trinidad & Tobago, Russia, Egypt, the US, Indonesia and Saudi Arabia. Each tonne of ammonia contains 177kg of hydrogen, so this represents a further 762,000 tonnes of H2.
A further 15 tonnes of hydrous ammonia (ie, dissolved in water) were imported into the EU in 2022, mainly from Norway, the UK, the US, Russia and Asia.
“Mixed fertilisers” include ammonium nitrate, calcium ammonium nitrate, ammonium sulphate, ammonium phosphates, urea ammonium nitrate solutions, as well as nitrogen-phosphorus, nitrogen-potassium and nitrogen-phosphorus-potassium fertilisers.
There are currently no imports of direct-reduced iron, or pig iron, made using hydrogen today as the process is still being commercialised.
Hydrogen imported in other forms, such as methanol, e-methane, e-fuels, or liquid organic hydrogen carriers, do not appear to be included in the CBAM, which could be a loophole that exporters and importers may seek to exploit.
source: hydrogeninsight.com
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