What means the Carbon Border Adjustment Mechanism for Scope 3 Decarbonization?

10/27/2023 | Reading time: 1 minute

The EU Carbon Border Adjustment Mechanism (CBAM) significantly influences the transition towards a climate-compatible economy.

Why? CBAM ensures that goods imported into Europe align with its commitment to carbon pricing. 

Here’s a short overview of what you need to know!

1️⃣ 𝗔𝗱𝗱𝗿𝗲𝘀𝘀𝗶𝗻𝗴 𝗖𝗮𝗿𝗯𝗼𝗻 𝗟𝗲𝗮𝗸𝗮𝗴𝗲 & 𝗖𝗼𝗺𝗽𝗲𝘁𝗶𝘁𝗶𝘃𝗲𝗻𝗲𝘀𝘀 𝗗𝗶𝘀𝘁𝗼𝗿𝘁𝗶𝗼𝗻

CBAM aims to prevent carbon leakage, which occurs when companies relocate production to countries with less ambitious climate policies to avoid carbon costs. 

2️⃣ 𝗣𝗵𝗮𝘀𝗲𝗱 𝗜𝗺𝗽𝗹𝗲𝗺𝗲𝗻𝘁𝗮𝘁𝗶𝗼𝗻

CBAM will be introduced in two phases. In October 2023, a reporting phase came officially into application. The full implementation is scheduled for 2026.

3️⃣ 𝗧𝗮𝗿𝗴𝗲𝘁𝗲𝗱 𝗣𝗿𝗼𝗱𝘂𝗰𝘁𝘀

CBAM will initially apply to a limited number of high-emission products, including cement, fertilizers, steel and ferrous metals, aluminum, hydrogen, and electricity.

4️⃣ 𝗜𝗺𝗽𝗮𝗰𝘁 𝗼𝗻 𝘁𝗵𝗲 𝗘𝗻𝘁𝗶𝗿𝗲 𝗦𝘂𝗽𝗽𝗹𝘆 𝗖𝗵𝗮𝗶𝗻

Businesses will now have to undertake detailed carbon accounting throughout their entire supply chain. Companies not initially included in the CBAM scope may also experience the impact of carbon costs being passed down the production chain.

5️⃣ 𝗘𝗻𝗰𝗼𝘂𝗿𝗮𝗴𝗶𝗻𝗴 𝗚𝗹𝗼𝗯𝗮𝗹 𝗔𝗱𝗼𝗽𝘁𝗶𝗼𝗻

CBAM not only sets new standards within the EU but also encourages Europe’s trading partners to implement similar measures. 

6️⃣ 𝗕𝗮𝗹𝗮𝗻𝗰𝗶𝗻𝗴 𝗚𝗹𝗼𝗯𝗮𝗹 𝗧𝗿𝗮𝗱𝗲 & 𝗖𝗹𝗶𝗺𝗮𝘁𝗲 𝗚𝗼𝗮𝗹𝘀

CBAM contributes to the ongoing debate about finding a compromise between global trade governance and climate policies. It exemplifies the EU’s commitment to aligning economic interests with environmental objectives.

In conclusion, it will be essential for businesses to adapt, and improve the transparency of their supply chain’s climate impact.

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