Global management consulting company Boston Consulting Group has last month stated that the EU carbon tax, which will be applied with the Carbon Border Adjustment Mechanism in 2026, will cause European steel importers to face additional costs of around EUR 2 billion annually by 2030, when the price of carbon in the EU is projected to reach more than EUR 100 per tonne. The magnitude of those costs will depend on the carbon efficiency of each producer. BCG analysis suggests that by 2032 the cost of iron and steel imported into the EU would rise by

US by 6% to EUR 102 per tonne

UK by 6% to EUR 134 per tonne

Turkey by 10% % to EUR 144 per tonne

South Korea by 12% to EUR 154 per tonne

China by 17% to EUR 184 per tonne

India by 32% to EUR 246 per tonne

BCG said “Starting in 2023, life will get progressively more complicated for companies importing energy-intensive products into the European Union, as well as for their non-EU suppliers. For the first few years, importers will need to document and report the CO2 footprints of imported electricity and of materials such as steel, iron, aluminum, cement, and fertilizers. Chemicals, hydrogen and plastics may be included as well. Starting in around 2026, this task will get more challenging: importers will need to calculate and pay a levy on each tonne of CO2 tied to those imports.”

BCG said “As the new tax system unfolds, compliance will only get more complicated. Importers will ultimately be responsible for documenting and paying for the carbon footprints not just of iron bars and bags of cement but of finished goods, including complex products such as cars and industrial machinery. That means accounting for all components, the materials used to make those components, the mines they were extracted from, and the fuel used in shipping. In other words, they’ll be on the hook for the carbon footprints of all their suppliers and their suppliers’ suppliers everywhere in the world. Efficiently managing the new CBAM requirements will be critical for both groups of importers. Those that struggle could face significant administrative burdens, higher costs, and supply chain disruptions as goods get stopped at the border. Companies that have a firm grip on the new system could gain a competitive advantage.”

BCG added “Most of the basic data needed by importers and foreign producers already exists within these companies' enterprise resource planning systems and those of their suppliers and partners. What is needed are solutions that can calculate carbon emissions according to the EU’s approved methodology and then allow each company in the value chain to easily and securely download and upload this information through a data exchange, carbon cloud, if you will and correctly calculate the tax. We believe that information technology is the key to efficiently implementing the CBAM in a way that will enable the tax to achieve its full potential in achieving the goals of the European Green Deal and driving global action on climate change.”

BCG and SAP have formed a partnership to deliver tech-enabled sustainability transformations intended to help companies accelerate their journey to zero waste and zero emissions. One of the initiatives underway is to develop a technology solution that will help impacted companies manage the CBAM process.

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