In the last two decades, the European Union has gradually reduced its greenhouse gas emissions thanks to strict climate policies. However, emissions associated with the import of goods into the EU have consistently increased, says the Belgrade Open School – BOŠ.
“European companies can simply decide to relocate their production to other countries outside the EU where they do not have to pay the cost for harmful emissions. Considering the EU’s efforts to achieve the goals of the European Green Deal, which mandates that Europe becomes a climate-neutral continent by 2050, a new climate regulation is being introduced. Its purpose is to motivate EU trading partners to take steps towards reducing dependence on fossil fuels, and also to protect the domestic economy,” it is added.
CBAM taxes iron, steel, aluminum, hydrogen, fertilizer, and electricity
The acronym for this regulation is CBAM: Carbon Border Adjustment Mechanism, a mechanism for regulating cross-border carbon emissions. According to this regulation, exporters to the EU will have to pay if the production of the goods they trade releases too many greenhouse gas emissions (GHG) into the atmosphere, particularly if it originates from “energy-intensive” activities.
“The CBAM Regulation covers carbon dioxide emissions and, if necessary, nitrogen oxide emissions (dominant in the transport sector). The regulation also defines the scope of this mechanism for products in the iron and steel industry, cement, aluminum, hydrogen, and fertilizer, as well as for electric power. Therefore, the application of CBAM includes products from these industries when these products are imported into the EU customs territory,” explained in the statement by BOŠ (Belgrade Open School).
According to the EU lawmakers’ vision, this regulation aims to ensure fair competition in the EU market by imposing a tax on imported products that companies within the EU already pay if they produce goods in the same manner. From the perspective of exporters to the EU, this is a measure that will further complicate their business operations.
CBAM is already being applied
The importance of CBAM is roughly inversely proportional to the attention it has received from authorities and mainstream national media. For the most part, the only entities that have informed about it in recent years are civil society organizations dealing with energy policies and climate change, such as BOŠ.
Thus, the public, apart from those with specific expertise, has remained uninformed about what CBAM is and the fact that the transitional phase of its implementation has already begun on October 1, 2023. In the early stage, the financial penalties for improper reporting will still be low.
“This phase will last for three years and will serve as an adjustment period for countries to adapt to CBAM and its provisions. From 2026, full implementation begins, and emissions will be taxed at the same rates as within the European Union,” say representatives from BOŠ. They further note that the implementation of the Carbon Border Adjustment Mechanism will significantly impact Serbia’s exports, especially in industries with high GHG emissions. This is due to the costs that will affect EU importers, and consequently, Serbian companies, as their products will become less desirable.
Companies still do not know their obligations
“Unfortunately, Serbia is unprepared for the initial phase of the Regulation establishing CBAM, given that its exports are primarily directed towards the EU, and its climate policies are not yet aligned with European ones. Serbian companies, especially in the SME sector, still do not know their obligations, nor the final impact of such a climate tool on their business and ultimate financial balance. Therefore, adapting to the reality of the existence of such a mechanism is a necessity, and decision-makers have plenty of work ahead,” states the announcement.
Beograd Open School has therefore produced a publication titled “CBAM – Carbon Tax; Pay Now or Pay More Later,” which aims to present the impact of this complex mechanism. In summary, the publication provides a history of climate policies leading to the creation of this climate tool, a detailed explanation of how it works in practice, and a call to key stakeholders in the legal and economic fields to establish adequate institutions for a smoother adaptation to CBAM.
Alternatively, you can witness the authorities rattling their weapons and bells while remaining eerily silent about the real conditions in which we will live and do business.
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