German importers “insufficiently prepared” for EU carbon border tax – consultancy

Large swathes of German industry will be impacted by the incoming carbon border tax, but a survey among affected companies shows they are “insufficiently prepared” for the scheme, said consultancy Deloitte. The carbon border adjustment mechanism – or CBAM – forces importers of certain products, like steel or fertiliser, to pay a fee if their product has a higher carbon footprint than their counterparts produced in the bloc, with the EU aiming to phase in the tax starting from October 2023. Initially, it will be limited to reporting requirements, until financial payments are due step by step from 2026. Of the decision-makers in companies which import affected products from outside the EU, 60 percent do not know the scheme, and only half of those who do say their company is affected, shows the survey. Less than half of the surveyed companies are preparing for the start of the transitional phase in which they will have to report emissions which stem from the production of imported products. “Even if the CBAM, with the corresponding financial implications, is not fully introduced until 2026, there is an acute need for action for many companies,” said Michael Schäfer, partner at Deloitte. Many respondents said they expect significant financial impacts and that they expect the CBAM to make their business less competitive.    

The CBAM has been lauded by some as a much-needed stimulus for climate action, where others see it as a fast route to new trade wars between the bloc and its trading partners. As per a December 2022 agreement between the EU parliament and member states, the CBAM will cover iron and steel, cement, aluminium, fertilisers and electricity. It also covers hydrogen, indirect emissions from the production of certain materials the energy used to produce aluminium, certain precursors, as well as some downstream products such as screws, bolts and similar objects made from iron or steel.