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A small fraction of European companies have complied with an early reporting deadline on their carbon-intensive imports, underlining the challenge of EU efforts to tax Co2 heavy products entering the bloc from 2026.
The EU’s carbon border adjustment mechanism (CBAM) is the world-first effort to introduce a tax on carbon-intensive imports to prevent a flood of cheap imports from countries with highly polluting industries from undercutting the bloc’s heavy industries, which are subject to strict climate regulation and have to pay for greenhouse gas pollution under the bloc’s emissions trading system.
But fewer than 10 per cent of 20,000 companies in Germany expected to report emissions did so by an early deadline this year, according to data collected by Germany’s emissions trading authority and shared with the Financial Times.
The figure was echoed by other national authorities. Sweden’s Environmental Protection Agency said that 11 per cent of expected reports had been filed.
“We expect a much larger number of reports than so far received,” said Jürgen Landgrebe from Germany’s federal environment agency UBA. “The most important reason is that most importers don’t know about the obligation so far,” he said, adding that this was not unexpected given that the process was still in a “transitional period”.
Companies in seven sectors including aluminium, steel, iron and fertilisers were required to submit reports quantifying the emissions of their imports by January 31, the first stage in a trial period that will run until 2026. Businesses that fail to report from mid-July will face a fine amounting to €50 per tonne of carbon emissions.
Many in industry fear that the amount of red tape involved will add to an already heavy administrative burden exacerbating concerns that the bloc is losing its competitiveness.
“There’s a lot of confusion and uncertainty” said Sarah Hay, climate policy manager at the Norwegian aluminium producer Hydro.
Analysts at Citi warned that EU countries “with a larger share of imports from Russia, Turkey, India and China in particular could see input costs of cement and lime, fertilisers, iron and steel, and aluminium rise”.
After a one-month extension to the deadline owing to technical glitches, the European Commission said that almost 13,000 reports had been submitted by the end of February. The majority of reports were on imports from China, which has been outspoken in its criticism of the measure.
In its initial assessment for the levy in2021, the commission said that it expected 239,000 import transactions to fall under the measure each year. A senior EU official said that it was difficult to judge how many reports should have been submitted per quarter as estimations had only been made on an annual basis.
EU officials played down the apparent under-reporting, given the novelty of the measure and said that proposals would be made soon to simplify the system based on early feedback from companies.
“We need to ask the right questions so our figures become more accurate,” one official said.
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