Energy prices, News, RES

CBAM – opportunity or threat for Polish and EU industry?

As of October 1, 2023. The transition period of the Carbon Border Adjustment Mechanism (CBAM CBAM), or border carbon tax, is in effect. What do we know today? The first reports must be submitted by January 31, 2024. and should cover emissions related to imported goods in the fourth quarter of 2023.

In the interim, CBAM covers cement, iron and steel, aluminum, fertilizers, hydrogen and electricity, key commodities for an innovative economy.
For now, business has to learn the models for counting the carbon footprint and the reporting procedure itself, which is quite a challenge. Problematic for companies include. Getting the right cadres who are knowledgeable in this area. A wave of training and courses has begun. From this there is also a transition phase – during this period we should learn CBAM reporting. By the end of 2025. Importers do not make any payments or financial adjustments in this regard.

Question marks
What will happen after January 1, 2026? This is the question being asked by companies that today depend on imports of key goods from outside the European Union. While the purpose of the introduction is understandable, i.e. CBAM is a climate policy instrument to prevent the escape of greenhouse gas emissions from the EU to countries with lower climate and environmental policy standards, we do not yet know the real impact of CBAM on the competitiveness of EU companies and the prices of goods.

CBAM raises several risks that many in the industry are asking questions about today. The price of goods imported into the EU will increase. In the case of steel, prices for imported products are expected to rise by 15%.
But CBAM is also an opportunity for industry, domestic companies and will level the playing field against foreign competition. In the short term, the number of commodities with a high carbon footprint may be reduced in the market. Manufacturers that care about high-quality products with low carbon footprints will choose to invest in new plants in Europe. Inshoring, which has been picking up speed even faster since the COVID-19 pandemic. Hence, investment in green steel, aluminum production based on renewable energy sources has already become an industrial megatrend. CBAM is becoming the impetus for new green investments.

However, it should be remembered that CBAM is only one side of the coin. The other is the reduction in free carbon allowances from 2027, which will force an even faster transition to zero- and low-carbon sources. The high carbon intensity of the Polish power sector means that the burden of the transition falls directly on individual companies.

In summary, Polish companies may gain from leveling the playing field through the CBAM mechanism, but at the same time they will be under tremendous pressure from high EU ETS fees.

Mikolaj Budzanowski
CEO Boryszew Green Energy & Gas