There will be growth in carbon markets throughout the world in the coming years, with jurisdictions wanting to keep tax revenue at home to spend on decarbonising industry rather than paying it to the EU under CBAM. Customers of EU importers are meanwhile seeking the convenience of being quoted a final CBAM-cost-paid price with the risk borne by the importer, which presents an opportunity for authorised declarants with sufficient resources.
Speakers at the inaugural Global CBAM Summit, organised by IACBAM in Prague on Thursday, dived deep into the myriad of factors surrounding the world’s first carbon import tax.
Among them was Michael Lund, managing director of Danish stainless steel distributor Damstahl, who pointed out companies, when importing CBAM goods, are building accruals on their balance sheet for future cost. These will be paid out in September 2027 when CBAM costs accrued in 2026 will need to be settled.
“Basically, we leverage that risk for the customers and … we have gained new customers in this … segment, where they either do not want to take the risk but do not understand the full game of CBAM,” Lund said at the event attended by Kallanish. However, having sufficient resources as a company is crucial. “It is also about having the power in the organisation to carry this through. It is data intensive, and it kind of touches all different disciplines within your company,” he added.
Many customers want the convenience of a simple CBAM-cost-included price. “Some of our customers [want], I guess I could say it’s [CBAM cost] not a separate line on an invoice, it is included, it’s calculated into the sales price of the customer, basically … that the price that you give should contain the CBAM cost. But that’s exactly the complexity, because right now we have to calculate X, Y amount, kind of guess the right cost that we pay in September 2027. There are not many customers who are willing to order now and to get the final bill in 2027,” he added.
Jan-Joost den Brinker, Chief Technology Officer – Dubrink, nevertheless said some customers prefer to split out the carbon cost onto a separate line on the invoice, “because it makes the conversation easier”.
Dan Maleski, CBAM Lead – Redshaw Advisors, pointed out that many jurisdictions do not have the incentive to introduce carbon pricing as it can initially stunt economic growth, especially in less developed countries. The price of carbon in existing markets is only a fraction compared to EU ETS.
“What other ways can we incentivise India or China to improve the cost of carbon? You go to the UN and ask them very politely, or you can get Baosteel to lobby the Chinese government to incorporate an effective cost of carbon, so Baosteel could be more competitive in Europe, which is what Europe’s doing,” he observed. Non-EU countries can also use their carbon tax revenue to reinvest into decarbonisation rather than paying it to Brussels, he added.
Maleski also said it is unlikely the European Commission will materially weaken ETS during its July review because many firms have already invested significant funds into decarbonising. He also mentioned the example of a US blue hydrogen ammonia project, whose entire business case rests on supplying the EU, threatening to scrap the project if changes were made to CBAM. “There’s a lot of political capital at stake for making sure that this cost [of carbon] doesn’t go away, not because of climate change reason, because of a business reason,” he noted.
One Turkish can maker in the audience expressed concern that her company’s raw material supplier does not have an MRP (Material Requirements Planning) system, which will impact their ability to declare emissions for imports into the EU. “The safest thing you can do right now is rely on default values and try to get them [your supplier] ready as soon as possible. Sit with them, explain them why an MRP is very important,” concluded den Brinker.
