Im­proved da­ta col­lec­tion and in­formed car­bon pric­ing are the keys to re­duc­ing the po­ten­tial im­pact of the Car­bon Bor­der Ad­just­ment Mech­a­nisms in the UK, EU, and pos­si­bly even the Unit­ed States.

Two weeks ago, the British High Com­mis­sion, in col­lab­o­ra­tion with the Uni­ver­si­ty of the West In­dies, re­leased a re­port en­ti­tled ‘UK Car­bon Ad­just­ment Mech­a­nism: Im­pli­ca­tions for Trinidad and To­ba­go’.

The re­port not­ed that Trinidad and To­ba­go is at risk of fac­ing in­creased ex­port costs to the Unit­ed King­dom as a re­sult of the pend­ing im­ple­men­ta­tion of the UK CBAM when it is op­er­a­tionalised in 2027.

How­ev­er, the UK is not the on­ly coun­try set to im­ple­ment such a mea­sure, as the EU is set to im­ple­ment its own CBAM in 2026.

Ac­cord­ing to the EU, the CBAM is the EU’s tool to put a fair price on car­bon emit­ted dur­ing the pro­duc­tion of car­bon-in­ten­sive goods that en­ter the EU, and to en­cour­age clean­er in­dus­tri­al pro­duc­tion in non-EU coun­tries.

Both CBAMs are tied to en­vi­ron­men­tal pledges made un­der the Paris ac­cord.

The re­port stat­ed that glob­al CBAMs present a sig­nif­i­cant eco­nom­ic chal­lenge to T&T due to the coun­try’s re­liance on car­bon-in­ten­sive ex­ports. The re­port not­ed that, based on 2023 ex­port fig­ures, 33.18 per cent of Trinidad and To­ba­go’s to­tal glob­al ex­ports fall un­der the prod­uct scope of ex­ist­ing or planned CBAMs.

This in­clude iron and steel (9.44 per cent) fer­tilis­ers (4.83 per cent), and in­or­gan­ic chem­i­cals (18.91 per cent).

To put that fig­ure in cur­ren­cy terms, the re­port stat­ed that min­er­al fu­els, min­er­al oils and prod­ucts of their dis­til­la­tion; bi­tu­mi­nous sub­stances; min­er­al wax­es ac­count­ed for US$2,287,547,895, while or­gan­ic chem­i­cals US$1,555,068,617; in­or­gan­ic chem­i­cals; or­gan­ic and in­or­gan­ic com­pounds of pre­cious met­als ac­count­ed for US$1,430,684,969 with iron and steel com­mand­ing US$713,925,096 and fer­tilis­ers $365,226,5822.

How­ev­er, the re­port not­ed the ac­tu­al ex­po­sure de­pends on the des­ti­na­tion of these goods, as a sub­stan­tial por­tion of these ex­ports is di­rect­ed to­wards coun­tries im­ple­ment­ing or in­tend­ing to im­ple­ment CBAMs, no­tably the EU and the UK, which, along with the US, ac­count­ed for 57.84 per cent of Trinidad and To­ba­go’s to­tal ex­ports in 2022.

How­ev­er, a pan­el dis­cus­sion at the British High Com­mis­sion­er’s res­i­dence in Mar­aval fol­low­ing the launch of the re­port gave some in­sight as to how the CBAM’s im­pact could be nav­i­gat­ed for the ben­e­fit of Trinidad and To­ba­go.

Han­na Sukhu-Ma­haraj, di­rec­tor of mar­ket­ing and lo­gis­tics at Pro­man, served as a mod­er­a­tor for the dis­cus­sion, but set about un­der­lin­ing how cru­cial find­ing a mid­dle ground would be for the en­er­gy sec­tor.

“Trinidad re­mains the largest ex­porter in the world for am­mo­nia, and in do­ing so it comes with its own chal­lenges, of course, be­cause we don’t have a home mar­ket for the prod­ucts that we pro­duce, specif­i­cal­ly methanol and am­mo­nia and UAN, you’re al­so at risk of or at the mer­cy of the ex­port mar­kets to which you call, “ she said

“Di­ver­si­fy­ing our mar­kets is fan­tas­tic, but that too comes with its chal­lenges. Be­cause, of course, the Point Lisas in­dus­tri­al es­tate was de­signed with the Eu­ro­pean and the US mar­kets in mind, sail­ing sev­en days away for the US mar­ket and about 14 days away to the UK mar­ket and the Eu­ro­pean mar­ket. So hav­ing said that, these are chal­lenges we have to get around. There’s no sim­ple way of do­ing it.”

Sukhu-Ma­haraj said it was un­clear if the US un­der Pres­i­dent Trump would im­ple­ment such a mech­a­nism, but it was like­ly that mea­sures to ad­dress such a pol­i­cy from the US would be sim­i­lar to those put in place for the UK and EU CBAMs.

Tama­ra Bu­jhawan, co-founder and chief op­er­at­ing of­fi­cer - Car­bon As­set De­vel­op­er As­so­ciates (CA­DA) En­er­gy stat­ed that pol­i­cy would have to be cen­tred around car­bon leak­age and sub­se­quent­ly car­bon pric­ing.

“We’re look­ing at car­bon leak­age. We’re look­ing at prod­ucts that are emis­sion in­ten­sive and trade ex­posed. Trade ex­posed, mean­ing that they are char­ac­terised by price elas­tic­i­ty, so they’re sen­si­tive to price in­creas­es, and they’re al­so many al­most per­fect sub­sti­tutes for them. So these are the goods that we are look­ing at,” she said, “I think the main thing we have to look at is car­bon pric­ing, im­ple­ment­ing a do­mes­tic car­bon price along­side the MRV (Mea­sure­ment, Re­port­ing and Ver­i­fi­ca­tion) be­cause with do­mes­tic car­bon pric­ing, we keep the rev­enue here lo­cal­ly, and that can help in­cen­tivise it.”

She ar­gued that an in­cen­tive pro­gramme or rein­vest­ments could be de­rived from this ap­proach.

Bu­jhawan said, “From an in­cen­tive per­spec­tive, you can use it ei­ther for adap­ta­tion pur­pos­es, for knowl­edge-build­ing ca­pac­i­ty, for knowl­edge shar­ing, and al­so for mit­i­ga­tion in­vest­ments. When you have a com­mon price, we can look at it in a cou­ple of ways. We have sec­tors, or we have goods that are cov­ered by CBAMs. Yes, there’s a lot of work to do to im­ple­ment the com­mon price, but we can have one of the sort of sig­nals what the sec­tor could re­al­ly ben­e­fit from, if we have a car­bon price that starts with a phased ap­proach, where we cov­er the goods that are af­fect­ed by CBAMs, then we ex­pand it to the wider emit­ting sec­tors, and then fi­nal­ly, look­ing at maybe sec­tors cov­ered by our NDC (na­tion­al­ly de­ter­mined con­tri­bu­tion).”

She ex­plained that da­ta col­lec­tion was nec­es­sary to fa­cil­i­tate that ap­proach.

Kis­han Ku­mars­ingh, head of the Mul­ti­lat­er­al En­vi­ron­men­tal Agree­ments Unit, Min­istry of Plan­ning and De­vel­op­ment, felt T&T was not in a bad place in that re­gard.

“It should be well known now by all stake­hold­ers that we al­ready do pos­sess a ro­bust and op­er­a­tional MRV sys­tem that is housed at the En­vi­ron­men­tal Man­age­ment Au­thor­i­ty and cur­rent­ly en­joys, as the last re­port I saw, a wide range of par­tic­i­pa­tion by the pri­vate sec­tor in sub­mit­ting their emis­sions. The in­dus­tri­al pri­vate sec­tor here al­ready does that as a mat­ter of course, be­cause they have to sat­is­fy their par­ent com­pa­nies,” he said.

He added that there had been an ad­just­ment to the MRV sys­tem which is now known as Na­tion­al Trans­paren­cy Sys­tem as part of T&T’s oblig­a­tions un­der the Paris Agree­ment.

He ex­plained that a re­cent Cab­i­net de­ci­sion should al­so al­low T&T to have its af­fairs in or­der ahead of the im­ple­men­ta­tion of the CBAMs.

Ku­mars­ingh said, “It would re­quire the pro­pos­al and would be sub­ject to con­sul­ta­tions, of course, be­fore it goes in­to law. What it pro­pos­es to do is to man­date un­der law the re­port­ing of emis­sions ac­cord­ing to pre­scribed in­ter­na­tion­al qual­i­ty as­sur­ance stan­dards and ver­i­fi­ca­tion by a third par­ty. Al­so, it is pro­posed that in­dus­try would al­so be re­quired to pro­vide mit­i­ga­tion plans over time as part of a rolling mit­i­ga­tion plan in the re­port­ing struc­ture, and this would be tied to any car­bon pric­ing mech­a­nism that we de­vel­op. And I should say that we are in the process of fi­nal­is­ing a pro­pos­al to de­vel­op the car­bon pric­ing mech­a­nism.”

Ku­mars­ingh said the gov­ern­ment was al­so look­ing at re­new­able op­tions such as blue hy­dro­gen and car­bon cap­ture as oth­er mea­sures to re­duce emis­sions in T&T and the var­i­ous in­dus­tries. This too, he ex­plained, would help the coun­try nav­i­gate the CBAM fu­ture set to come.