CBAM in the Iron and Steel sector
The Carbon Border Adjustment Mechanism (CBAM), introduced by the European Union, is transforming industries like iron and steel by promoting climate-friendly practices and fair competition. This blog outlines the essentials of CBAM in the Iron and Steel sector and provides practical steps for businesses to comply with these pivotal regulations.
Understanding CBAM in the Iron and Steel Sector
CBAM is a critical part of the EU’s strategy to achieve climate neutrality by 2050. It addresses carbon leakage—a phenomenon where industries relocate production to regions with less stringent climate policies. By applying a carbon price to imports, CBAM ensures that products imported into the EU reflect similar emissions costs as those produced domestically.
In the Iron and Steel sector, CBAM applies to a broad range of emissions, from direct production emissions to indirect emissions linked to electricity use, and embedded emissions in precursor materials like pig iron.
Key Features
- Sectors and Scope
CBAM targets industries with significant greenhouse gas emissions, including the Iron and Steel sector. Emissions associated with production, including those embedded in precursors, fall within its purview. - Implementation Timeline
- Transitional Phase (2023-2025): Focus on reporting emissions without financial obligations.
- Full Implementation (Post-2026): Importers must purchase CBAM certificates for emissions embedded in imported goods.
- Reporting Requirements
Businesses in the Iron and Steel sector must provide quarterly reports detailing direct emissions (from production), indirect emissions (from electricity), and embedded emissions in precursors like sintered ore.
Steps to Comply with CBAM in the Iron and Steel Sector
- Emissions Monitoring
Establish system boundaries to capture all production-related emissions, from raw materials to electricity usage. Use approved methodologies such as mass balance or direct measurement. - Leverage the CBAM Transitional Registry
The registry streamlines data entry and report submissions. Importers and operators should become proficient in its use to ensure compliance. - Adopt Sustainable Practices
Collaborate with suppliers using low-carbon technologies. Transitioning to hydrogen-based production or electric arc furnaces can reduce emissions and associated CBAM costs.
Opportunities for Businesses
Though compliance with CBAM in the Iron and Steel sector presents challenges, it also offers significant benefits:
- Market Advantage: Demonstrating environmental responsibility strengthens a company’s reputation.
- Innovation Incentives: Adopting advanced technologies enhances efficiency while reducing emissions.
- Global Alignment: Aligning operations with CBAM ensures businesses remain competitive as sustainability becomes a global priority.
Why CBAM in the Iron and Steel Sector Matters
CBAM is reshaping international trade dynamics by holding businesses accountable for their carbon footprint. For the Iron and Steel sector, compliance ensures continued market access and demonstrates leadership in sustainable production.
By embracing CBAM regulations and prioritizing innovation, companies can thrive in a carbon-conscious economy while contributing to global sustainability goals.
Need help with CBAM compliance?
Carbon Complete offers expert CBAM services to ensure your business meets international environmental standards. With accurate carbon emissions reporting and strategic insights, we help you understand current regulations while preparing for future sustainability challenges.
