CBAM can improve American competitiveness

Analysis by the Climate Leadership Council, a climate change alliance, indicates that the application of the European Carbon Border Adjustment Mechanism (CBAM) can enhance the competitiveness of U.S. companies.

According to the Climate Leadership Council, if the CBAM tax is set at $120 per ton of CO2 emissions, U.S. importers would have to pay around $300 million, and Chinese importers would have to pay $3.4 billion.

Imports from China are expected to be impacted about 11 times more than imports from the U.S. U.S. companies have the potential to replace Chinese manufacturers and other retail competitors in the European market.

It is important to note that the carbon tax is imposed on the emissions related to the production of steel, aluminum, cement, fertilizers, hydrogen, and electricity imported into the EU. This only affects a portion of U.S. exports to the EU, with only 1.1% ($4 billion) of the $350 billion exported to the EU in 2022 falling under CBAM. China, the EU's largest merchandise trading partner, exported $19 billion in 2022, nearly five times the amount covered by CBAM.

This analysis shows that implementing a system to account for the carbon intensity of products sold will help U.S. companies operate more efficiently.

The authors emphasize that the actual impact of CBAM depends on:

  • Implementation challenges
  • Data quality
  • Ease of compliance
  • Appropriate handling of confidential business information.

The first phase of CBAM began on October 1. Importers must submit their first report by January 31, 2024. For each unregistered ton of emissions, there is a risk of a fine of 10-50 EUR.

According to analysts, "The threat of compliance fees is intended to encourage more comprehensive reporting but will lead to price pressure on U.S. manufacturers who are unwilling or unable to provide sufficient 'may' information," the authors said.

Recall that European Commission President Daniel Ferry said the transition phase for implementing the Carbon Border Adjustment Mechanism (CBAM) in the EU would begin on October 1.

As reported earlier, one of the key tools in the EU's climate policy is the Carbon Border Adjustment Mechanism (CBAM), providing a level playing field for companies needing to comply with climate standards and various tax conditions.