Carbon Border Adjustment Mechanism (CBAM)

How CBAM-driven reinvention of your supply chain may foster a competitive advantage

CBAM explained

Carbon Border Adjustment Mechanisms (CBAMs) address the climate challenge by imposing a carbon price on certain high-emission imports to prevent carbon leakage. These mechanisms encourage global businesses to monitor and reduce carbon emissions across operations while enabling fair competition within and outside the EU. Beyond the initial importers, users of these goods may face higher prices as suppliers pass on CBAM costs, affecting supply chain economics.

Several countries, such as the UK and Canada, are considering adopting CBAM. The EU has already implemented its CBAM, complimenting the EU Emissions Trading System (ETS). EU CBAM applies to goods like cement, steel, aluminium, fertilisers, electricity, and hydrogen. The mechanism is a pivotal element in the growing suite of regulations and policies under the Green Deal, pushing companies towards greener practices and helping them navigate the complexities of the new sustainable business environment in Europe.

EU CBAM commenced in 2023, with the first report due beginning 2024,  and full financial implications starting in 2026 and phasing in until 2034. As mechanisms like CBAM become more common, companies must innovate and adapt. Compliance not only aligns businesses with international sustainability standards, but also positions them competitively in a low-carbon economy.

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    Video 07/08/24

    EU CBAM Explanatory

    EU CBAM’s impact on business: how prepared are you?

    Use this quick CBAM readiness assessment to understand how prepared your organisation is for the EU CBAM

    Do you import goods in scope of CBAM, or do you supply CBAM component materials to your clients that are part of CBAM goods?

    Goods covered by CBAM: cement, iron (e.g. screws and bolts), steel, aluminium, fertilisers, electricity, hydrogen. The full list can be found in the CBAM regulation’s Annex.

    Yes No
    CBAM will not be directly applicable to your imports. However, stay informed about future updates as the scope of CBAM is expected to expand to include additional goods. Speak with us to learn more.

    What next?

    Contact information for your local CBAM specialist is provided to the right.

    Talk to:

    Email me

    For more related content, check out our latest thought leadership.

    The CBAM applies to your imports, and you should comply with the relevant regulations to achieve proper carbon cost adjustments. Answer the following questions to discover your readiness level.

    Have you conducted an impact assessment to understand how CBAM affects your business operations and costs?

    Understanding relevant regulatory requirements thoroughly helps achieve compliance and assess costs. Conducting an impact assessment identifies potential cost increases and operational changes due to CBAM regulations.

    Yes No
    Are you aware of the specific documentation and administrative processes required for CBAM compliance?

    The CBAM regulation includes secondary legislation, templates, and guidance documents. Depending on your territory, follow specific processes with the competent authority for accurate reporting. Awareness of documentation and processes enables compliance and helps avoid penalties.

    Yes No
    Do you have an overview of the data that is required to comply with CBAM and do you have the data available?

    Readily available data is crucial for accurate CBAM reporting and compliance. Importers must collect data from suppliers. Suppliers must communicate data to clients and sometimes collect it from their own suppliers.

    Yes No
    Have you provided training to your team on CBAM regulations and compliance requirements?

    Training your team helps them understand their roles in CBAM compliance. You should aim to establish suitable governance structures to maintain compliance over time.

    Yes No
    Have you engaged with your suppliers or, in the case of you being a supplier, with your clients to address the impact of CBAM with them?

    Communication throughout the supply chain is key to comply with CBAM. Engaging with suppliers and clients helps to collaboratively manage the impact of CBAM across the supply chain.

    Yes No
    Beginning readinessYour organisation is at the initial stage of CBAM compliance readiness. You should further build your knowledge and develop your processes. The first report was due on January 1, 2024 so it is important you start to act as soon as possible to reach future compliance. Speak with us to learn more. Advanced readinessYour organisation has taken important steps towards CBAM compliance. You are gathering necessary data and conducting preliminary assessments. Continued efforts and training will help you achieve full compliance and optimise your processes. Speak with us to learn more. Leading readinessYour organisation is well-prepared for CBAM compliance. You have the necessary data, and training in place, and are actively engaging with suppliers and clients regarding CBAM impacts. You are positioned to handle the regulatory requirements effectively and lead the way in compliance. Speak with us to learn more.

    What next?

    Contact information for your local CBAM specialist is provided to the right.

    Talk to:

    Email me

    For more related content, check out our latest thought leadership.

    Assesment completion 0%

    From 1 October 2023 - quarterly CBAM reports are due (first report was due 31 January 2024).

    From 1 January 2026 - Liable to prepare and submit annual CBAM reports as well as purchase and surrender CBAM certificates equivalent to the embedded emissions imported in your CBAM goods. You will also need to determine if a credit for any local carbon pricing paid is available, which may be used to reduce the number of CBAM certificates required.

      

    Navigating the strategic landscape of CBAM to unlock sustainable growth

    Unlocking value through sustainable supply chain reinvention

    Embracing the challenges and opportunities presented by CBAM requires a comprehensive strategy for businesses aiming to align with evolving carbon emissions standards, and optimise their competitive edge in a carbon-conscious market.

    At PwC, we understand the multifaceted challenges and opportunities CBAM presents to global businesses. Our dedicated team of advisors bring deep industry & supply chain knowledge and regulatory expertise to tailor solutions that not only achieve compliance with CBAM but also leverage it as a strategic asset. We don’t look at regulations like CBAM in isolation, instead we recognise the importance of aligning CBAM compliance with other regulatory requirements, such as the Corporate Sustainability Reporting Directive (CSRD) and EU Emission Trading System (EU ETS), finding synergies and unlocking value in the process. By harnessing advanced technologies and our global network of Alliance partners, we offer clarity and precision in navigating the complex data landscape of carbon emissions, transforming compliance into a competitive advantage.

    Embracing CBAM goes beyond mere adaptation; it's about reimagining your business model in the context of a low-carbon economy. Our strategic approach focuses on:

    • Legal and regulatory guidance to navigate the evolving landscape of CBAM, ensuring your business remains ahead of compliance obligations and leverages regulatory incentives.
    • Comprehensive assessment of your current operations, supply chains, and product portfolios to identify direct impacts and opportunities for optimisation under CBAM regulations.

    • Integration of carbon management strategies with financial planning and risk management, enhancing resilience and uncovering new avenues for growth and innovation.
    • Development of a roadmap for net zero transformation, aligning with CBAM's phased implementation to progressively reduce carbon intensity and costs associated with carbon pricing.

    • Implementation of governance models and operational strategies that embed sustainability into the heart of your business, fostering a culture of innovation and environmental stewardship.
    • Providing practical administrative support from local offices, facilitating smoother adaptation to CBAM requirements and ensuring consistent implementation across the regions worldwide. 

    [Find out more about PwC Net Zero Transformation Services]

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    Claudia Buysing Damsté

    Claudia Buysing Damsté

    Partner, Rotterdam, PwC Netherlands

    Tel: +31 (0)65 103 04 63