TAKE A CBAM HEALTH CHECK! SUPPORT WITH THE CARBON BORDER ADJUSTMENT MECHANISM

The EU’s Carbon Border Adjustment Mechanism (CBAM) came into force in October 2023, with EU importers now obligated to report on the specific embedded emissions of certain goods.

What is EU CBAM?

It is a policy designed to prevent “carbon leakage.” Carbon leakage happens when companies relocate production to countries with less strict climate regulations to avoid the EU’s costs for emissions.

CBAM applies a carbon price on certain imported goods from countries that don’t have equivalent carbon pricing systems. This ensures that imports and EU-made products are subject to similar carbon costs, promoting fair competition and encouraging global efforts to reduce carbon emissions and encourages cleaner industrial production in non-EU countries.

The EU CBAM is the first scheme, the UK and others will follow. The goods in scope vary from country to country but EU CBAM includes: cement, iron and steel, aluminium, hydrogen and fertiliser. As CBAM moves from its current transition period to the definitive period beginning January 2026, businesses exporting these commodities to the EU need to understand the carbon price embedded in the production processes – their own and their suppliers. For businesses, it presents both a challenge and an opportunity to lead in sustainability and demonstrate a commitment to global climate goals.

If a UK company exporting to the EU under the new CBAM requirements doesn’t know the carbon value (the emissions linked to the production of their goods), they may face challenges:

Default Carbon Price: The EU will apply a default carbon value, which could be higher than the actual emissions of the product. This might make the goods more expensive and less competitive.

2. Additional Reporting Burden: The company may need to provide emissions data retroactively, which could require extra effort, time, and cost to meet compliance.

3. Risk of Non-Compliance: If they fail to meet the reporting requirements, their goods might face delays, penalties, or even restrictions when entering the EU market. To avoid these issues, UK companies need to track and report their carbon emissions accurately or work with their supply chain to gather the necessary data.

If this is an area of concern, the Chamber can help you to connect with experts in the area and to take a CBAM Health Check! Contact export@liverpoolchamber.org.uk for further information.