Matthew Gardner, managing director of global consultancy Sustainserv, explains the new regulation that imposes a tax on carbon-intensive products being imported into the European Union.

The Carbon Border Adjustment Mechanism (CBAM) is a new law that provisionally came into effect in the European Union in October 0f 2023. Initially, it requires that companies importing materials within certain categories account for their carbon-emissions impact. Then, on January 1, 2026, they will be assessed a carbon tax on those materials. 

“The EU wants to make sure that, under their climate goals, companies aren’t simply offshoring the manufacturing of products to parts of the world that don’t have climate regulations in place,” Gardner explains.

Currently, the law applies to a limited number of materials, including iron, steel and cement. That category covers a wide range of imports, both in the form of components and finished product. It includes items as small as metal fasteners.

Questions remain as to how importers will measure the carbon intensity of imports affected by the law. For now, EU regulators will rely on importers’ estimates of those levels, covering raw materials, manufactured goods and the transportation required to get them to destination. To calculate accurate numbers, companies will need to put into place a method of gathering the relevant information from suppliers. 

Moving forward, importers will need to go deep into their supply chains to obtain the necessary details as the basis for calculating the carbon tax. “That’s where the rubber meets the road,” says Gardner. “You have to be interacting with your suppliers, and they need to be willing to provide that information to you.”

Gardner acknowledges some “unclarity” as to the precise methodology for calculating carbon impact. “I expect there will be a bit of a shakedown cruise as the law is put into place, but companies need to be aware of this, putting into place efforts to the best extent that are practicable,” he says.