Breaking News – CBAM – The European Union’s New Green Tax from the Buyer’s View

This time, Rodrigo Scolaro, from GEP Cost Drivers, brings to light a relevant update on the global ESG agenda, discussing the following issues:

Exploration of the concept of CBAM and its relationship to the growing global concerns around ESG.

Analysis of the influences of this agreement and the possibility of other countries following a similar trajectory.

Assessment of potential impacts on the global purchasing sector in the coming years.

What is CBAM?

Mechanism for Carbon Adjustment at the Border. It represents a strategic response by the European Union to growing global concerns related to environmental issues, specifically in the context of Environmental, Social, and Governance (ESG).

CBAM, a tariff mechanism, was recently implemented in October 2023 and reflects Europe’s commitment to investing in low-carbon dioxide production, involving a more environmentally friendly industrial and energy approach with reduced environmental impacts.

Investments in sustainable production have resulted, in many sectors, in an increase in production costs. This phenomenon occurs due to the choice of cleaner energy sources, despite being potentially more expensive compared to polluting and more accessible sources.

The European Union identifies this disparity as an injustice, considering that countries, such as China, often opt for cheaper and more polluting production methods.

The CBAM is introduced as a new tax on imported products from highly polluting production, seeking to equalize competitive conditions. Although it was approved in October, there is still no definitive financial rate.

Currently, declaring the level of pollution associated with each imported item is the preliminary requirement. In 2026, the financial rate will be established based on these statements.

The product groups covered by this declaration process include: steel, iron, aluminum, cement, hydrogen, electricity and fertilizers. These items, often imported from regions with practices less focused on sustainable production, become the object of this measure.

The implications of this agreement transcend European borders, affecting global trade.

It is worth noting that the European Union was a pioneer in adopting such a substantial measure in favor of environmental protection.

Similar consideration is already observed on the part of political agents in the United Kingdom and the United States, suggesting a tendency for other countries to follow this path towards higher standards of environmental responsibility.

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