Are Direct and Indirect Emissions used in the production process when reporting to CBAM?

The Carbon Border Adjustment Mechanism (CBAM) is an EU initiative aimed at reducing carbon leakage by imposing a carbon price on imports of certain goods from outside the EU. When reporting to CBAM, both direct and indirect emissions associated with the production process are considered. Direct emissions, known as Scope 1, are the emissions released to the atmosphere as a direct result of a production process, such as emissions from combustion in owned or controlled boilers, furnaces, vehicles, etc. Indirect emissions, referred to as Scope 2, are the emissions resulting from the generation of purchased electricity, steam, heating, and cooling consumed by the reporting company. For the CBAM, accurately reporting both direct and indirect emissions is crucial. This allows for a fair assessment of the carbon content of imported goods, ensuring that products entering the EU market are treated equally, regardless of their origin. The inclusion of both emission types ensures that the CBAM effectively incentivizes cleaner production processes outside the EU, aligning with its goal to mitigate climate change and promote sustainable development globally.