CBAM is going to hit you hard

The Carbon Border Adjustment Mechanism (CBAM) is a policy tool by the European Union (EU) to tackle the issue of carbon leakage and ensure a level playing field for EU industries in climate change mitigation. It aims to prevent the relocation of carbon-intensive industries, like the aluminium industry, to regions with less stringent climate policies, which could increase global greenhouse gas emissions.

The main objective of the CBAM is to align the carbon costs of imported goods with those faced by EU producers, thereby avoiding competitive disadvantages for European industries that are subject to more rigorous climate regulations. It intends to create an economic incentive for EU and non-EU producers to reduce carbon emissions.

1. Scope: The CBAM would initially focus on specific carbon-intensive sectors, such as cement, steel, aluminium, chemicals, and electricity generation. These sectors are subject to the EU Emissions Trading System (EU ETS) or equivalent carbon pricing mechanisms within the EU.

2. Carbon Pricing: The CBAM would impose a carbon price on imports of goods from non-EU countries with a high carbon footprint. The carbon price would be calculated based on the carbon content of producing the imported goods. This would help create a more level playing field between EU producers and their international counterparts.
   
   
3. Importers’ Obligations: Importers would be responsible for meeting the CBAM requirements. They would need to buy and surrender a corresponding amount of carbon allowances to cover the embedded carbon in their imports. These allowances would be equivalent to the carbon price under the EU ETS or a similar mechanism.
   
   
4. Monitoring and Verification: Robust monitoring and verification systems would be implemented to ensure the accuracy of the carbon footprint calculations associated with the imported goods. This would involve data collection, reporting, and verification procedures.
   
   
5. Potential Impact: The CBAM could incentivize non-EU countries to adopt more stringent climate policies to reduce carbon emissions. It could also encourage EU industries to invest in cleaner technologies and practices to remain competitive. However, concerns have been raised about potential trade tensions and the impact on global supply chains, which need to be carefully addressed during the design and implementation of the mechanism.
   
   

Be aware if you have suppliers outside the EU. The transition period ends on January 1, 2026, and you must pay taxes on carbon emissions. Therefore, keep your local suppliers fed with attractive castings so that they can survive before you need them after the prices of your imported castings skyrocket.

When you want to be prepared for CBAM to make castings more sustainable or even acquire castings moving back to Europe, take a deeper look into the Sustainability Workshop.