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CBAM: Definition & important aspects
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CBAM in a nutshell:
The Carbon Border Adjustment Mechanism (CBAM) is an EU border adjustment system that levies CO2 charges on imports of certain CO2-intensive products from non-EU countries. For procurement, this means the need to document CO2 emissions in the supply chain and to factor additional costs for imports from third countries into the procurement strategy.
Example: A European steel processor imports 1,000 tons of steel from India in 2026, generating 1.8 tons of CO2 per ton, which at a CO2 price of €90/ton leads to CBAM costs of €162,000, unless comparable CO2 costs can be demonstrated in the country of origin.
Contents
What is CBAM in purchasing?
CBAM, or Carbon Border Adjustment Mechanism, is a European Union regulation that aims to reduce CO₂ emissions from imported goods and create a level playing field. With the introduction of CBAM, importers are obliged to purchase CO₂ emission certificates for the imported products, which reflect the CO₂ emissions during production. This is intended to prevent companies from relocating their production to countries with less stringent environmental regulations in order to save costs.
Main components of CBAM in purchasing:
- Emissions recording: Recording of CO₂ emissions generated during the production of imported goods.
- Purchase of certificates: Purchase of emission certificates corresponding to the CO₂ emissions recorded.
- Reporting obligation: Obligation to regularly report CO₂ emissions to the competent authorities.
- Transitional register: Establishment of a transitional register to track CO₂ emissions and the certificates acquired.
- Customs tariff numbers: Determination of the relevant customs tariff numbers for the categories of goods concerned.
Importance for buyers:
- Cost control: By factoring CO₂ costs into procurement costs, buyers can better control the total cost of goods.
- Transparency and traceability: Clear documentation of CO₂ emissions and the certificates acquired improves transparency in supply chain resilience.
- Legal certainty: Compliance with CBAM regulations minimizes legal risks and potential fines.
- Sustainability goals: Supporting the company's sustainability and climate protection goals by selecting environmentally friendly suppliers.
- Supplier relationships: Promoting a collaborative partnership with suppliers who also implement sustainable practices.
CBAM: From free emission certificates to border adjustment mechanisms
Building on the theoretical basis of the Carbon Border Adjustment Mechanism (CBAM), it becomes clear how important it is to avoid risk analysis and carbon leakage. While the EU is tightening its climate protection measures, domestic companies are facing higher production costs. In order to protect the industry from unfair competition from countries with laxer emissions regulations, a change in approach was necessary.
Old: Free allocation of emission allowances
Traditional approach: In the past, companies received free emissions certificates as part of the EU Emissions Trading System (EU ETS). This system was designed to prevent energy-intensive industries from moving to outsourcing, where there are less stringent environmental regulations. In practice, this meant that companies had to pay less for their CO₂ emissions in order to maintain their competitiveness. However, this approach led to an oversupply of allowances and weak price signals, which limited the incentives to reduce emissions. There was also criticism that the free allocations were a burden on the EU budget and were not compatible with the climate targets.
New: Carbon Border Adjustment Mechanism (CBAM)
Carbon Border Adjustment Mechanism: The modern CBAM approach replaces free emission allowances with a border adjustment. Importers must now purchase certificates for the CO₂ emissions of imported goods at a price that corresponds to the EU ETS price. This ensures that both domestic and foreign manufacturers are subject to the same CO₂ costs. This offsets competitive disadvantages and creates a strong incentive for global emission reductions. The innovation lies in the direct pricing of imported emissions and the promotion of transparent reporting on the carbon intensity of products. In practical terms, companies benefit from more stable market conditions by gaining planning security and being encouraged to use sustainable production methods.
Practical example: Steel industry
A European steel manufacturer competes with imports from a country with lower environmental regulations. Under the CBAM, importers have to purchase certificates for the CO₂ emissions of the foreign steel, which increases import costs. The European manufacturer invests in lower-emission technologies and reduces its CO₂ emissions by 20%. The CBAM levels the playing field and the manufacturer can remain competitive despite higher environmental standards. The CO₂ emissions in the production control are falling and the industry is moving towards climate-neutral processes.
Conclusion: CBAM as a strategic success factor for sustainable procurement management
CBAM is an important tool for companies that want to make their procurement processes more sustainable while ensuring compliance with legal requirements. By integrating CBAM into procurement management, companies can reduce their CO₂ emissions, increase transparency in the supply chain and ensure the quality of procured goods and services. Despite the challenges, such as complexity and high implementation costs, the benefits of CBAM offer significant opportunities for a sustainable and competitive procurement strategy. With clearly defined processes, the use of modern technologies and the promotion of a cooperative relationship with suppliers, companies can successfully implement and continuously improve CBAM. This not only contributes to the efficiency and sustainability of procurement, but also strengthens the competitiveness and sustainable development of the company. Overall, CBAM is a valuable tool in any buyer's toolbox and helps companies to make their supply chains more efficient, secure and environmentally friendly.
