The experimental phase for the new EU folly, the Carbon Border Adjustment Mechanism (CBAM), or border climate tax, has started on Oct. 1. As a desperate spokesman for the German industry put it, “you have to certify until the last screw.” EU trade partners threaten legal actions at the World Trade Organization and eventually counter-tariffs.
In this first transitional phase, the CBAM applies only to the import of cement, iron, steel, aluminum, fertilizer, electricity, and hydrogen: Importers of these goods will have to report to the authorities on the volume of goods imported and the amount of greenhouse gasses emitted in relation to their production, but will not have to pay any compensation for the time being.
The first report with the data collected will have to be submitted to the relevant authorities by Jan. 31, 2024. During this preparation period, both importers and the Commission itself will collect useful data in anticipation of the Carbon Border Adjustment Mechanism’s entry into force in full form, scheduled for 2026. At that point, importers will have to purchase CBAM certificates to offset the CO2 emissions associated with the production of imported goods within the Union’s perimeter, similar to what European manufacturers must do under the ETS today.
According to the German Chamber of Commerce and Industry (DIHK), reporting includes “all products in the universe,” Focus reports; “For instance screws, if the price of the supplies is over €150. This is a burdening factor for instance for machine tools producers or metal processing companies, which cannot order enough screws inside the EU.”
“Highly complex calculation and verification methods” are required, DIHK head Volker Treier complains, and the regulations for this have only been known since mid-August. “To this day, we don’t even know which authority in Germany is responsible for CBAM.” The IHK fears “a huge administrative burden” for small and medium-sized companies. In some cases, they do not even know to what extent they are actually affected. Errors and missed deadlines are inevitable.
According to the DIHK, foreign manufacturers will have to provide their EU customers with a wide range of data in the future—the cost of proof would be reflected in prices.
Wolfgang Große Entrup, chief executive of the German Chemical Industry Association (VCI), described this effort this way: Importers and users of imported products currently have to fight their way through hundreds of pages of legal text and guidelines. “The companies feel like schoolchildren who have to teach their new foreign classmates Latin in just a few weeks—even though they themselves have only just started learning,” he added. “Ora et labora,” every Latin student once learned: “pray and work.”