Companies lament excessive bureaucracy as EU launches carbon border tariff

German companies have complained about highly complicated reporting obligations and a lack of preparation time for the start of the EU’s first phase of CO2 emission tariffs on imports. Since Sunday 1 October, the Carbon Border Adjustment Mechanism (CBAM) has become the world's first scheme to force importers to report the emissions embedded in imports of iron, steel, aluminium, cement, electricity, fertilisers and hydrogen. "There is a lot of uncertainty as to who will be affected and to what extent," Matthias Blum, head of foreign trade at the German Chemical Industry Association (VCI) told energy and climate newsletter Tagesspiegel Background. "The companies now have to consult product lists and examine their entire value chain for the imported goods listed therein. This could also be screws or metal rods for production. Or packaging," Blum said. "The effort is simply immense."

Because the CBAM covers basic materials, the new reporting obligations affect thousands of companies processing them, many of which are unprepared. "Particularly among small and mediums-sized enterprises, many are only now coming to grips with the issue," trade expert Stephan Freismuth from consultancy KPMG told the newsletter. He said the biggest problem is to request the necessary data from suppliers, who are usually even less prepared for the new requirements than their European trading partners. The chemical industry lobby also lamented that the EU only published details of the implementation in mid-August, leaving companies too little time to prepare. "Six weeks for a legally compliant implementation is — to put it politely — very ambitious." But environmental organisation Germanwatch said the tariff would allow higher CO2 prices in European emissions trading and create an additional incentive for other countries to speed up the energy transition and climate-friendly industry transformation. "The EU has scored a coup with the introduction of the CO2 border adjustment," said the NGO’s Christoph Bals, according to a newspaper taz.

The basic idea of the CBAM is that the future levy, which is due from 2026, will be equivalent to what European companies pay for their CO2 emissions through the European Emissions Trading Scheme, to avoid putting them at a disadvantage vis-à-vis global competitors.