Baemmm, uh CBAM. The European Union’s CO2 tariff has been law since October 1. It doesn’t sound like Baemmm by chance, it is…

About

The European Union is introducing a kind of carbon dioxide duty. For a list products with a particularly high emission of CO2 and equivalents in the production chain, namely first for

  • iron
  • steel
  • aluminium
  • hydrogen
  • electrity
  • cement
  • and fertilizer.

Extremely complex determination of CO2 emissions from international suppliers

With immediate effect German companies that import such materials must determine the emissions of their suppliers that supply materials from the above list. But it is not enough to ask and get some figures.

Rather, the reporting obligations are standardized. European companies must provide their suppliers with extensive Excel lists containing many columns and rows in different colors. Suppliers and business partners in different parts of the world must report emissions in these lists in accordance with a 266-page guideline issued by the EU Commission. This, of course, presents companies with significant communication and practical challenges.

The CBAM (Carbon Border Adjustment Mechanism) represents a kind of tariff on carbon dioxide

In the future, products originating from countries with more lax environmental regulations will incur additional costs when imported into the EU. For example, a German company importing steel from a country where CO2 emissions are less strictly regulated will have to pay extra for it. This serves the EU’s goal of reducing emissions both in Europe and globally. However, for companies in the EU, for example in Germany, that import and process steel, this initially means a considerable burden.

Of course, this is precisely the starting point for the intended steering effect. Because the goal is of course – similar to the CO2 price – that German industrial companies invest in green technologies such as hydrogen and, whether in factories on European soil or in other countries, thereby produce under much lower CO2 emissions than was previously possible.

A logical effect would be that imports of non-green produced materials will be cheaper at first, as their producers do not have to refinance the high future investments. Therefore, the efforts of industries that produce green should be protected.

This is what this duty is for. Any supplying company that wants to export to the EU and does not want to pay the new levy under CBAM will have to produce green. That is the whole point.

The EU climate duty is closely linked to European emissions trading. Companies must purchase CO2 allowances for greenhouse gas emissions, for which a certain price is set in the EU. This is intended to encourage companies to do more to protect the climate. One problem with this is that European companies may be tempted to source CO2-intensive products from countries without emissions trading, which would merely shift CO2 emissions. CBAM is designed to prevent this by taxing imports of harmful goods from non-European countries.

While the payments won’t take effect until 2026, European companies are already required to identify and document how much carbon dioxide is caused by the goods they import in other parts of the world. This task is extremely challenging given the rollout timeline.

Once you imagine that presumably many suppliers outside the EU have not heard of CBAM and the associated reporting requirements, but importers can be sanctioned if they violate the rules, it becomes clear that this is a matter of drilling thick boards.

The agency be nice supports its clients in fulfilling reporting obligations of any kind, CSRD, climate accounting or footprints, and now also with the requirements arising from CBAM. Translated with www.DeepL.com/Translator (free version)

Foto von Susan Wilkinson auf Unsplash

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