Carbon Border Adjustment Mechanism (CBAM): Implications for Logistics and Supply Chains - Broekman Logistics
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Carbon Border Adjustment Mechanism (CBAM): Implications for Logistics and Supply Chains

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As global efforts to combat climate change intensify, the European Union has introduced the Carbon Border Adjustment Mechanism (CBAM), a groundbreaking measure designed to curb carbon emissions and ensure fair competition. For organisations relying on logistics service providers, understanding the CBAM is crucial for maintaining compliance and optimising supply chain operations. This blog explores the essentials of the CBAM, its impact on logistics, and how businesses can prepare for this significant regulatory change.

Understanding the Carbon Border Adjustment Mechanism

The CBAM, implemented by the European Union, aims to equalize the cost of carbon between EU-produced goods and imports. It seeks to prevent carbon leakage, where companies relocate production to countries with looser emission regulations, undermining global climate goals. Essentially, the CBAM imposes a carbon price on imports of certain goods to align their carbon costs with those produced within the EU.

According to the Dutch Tax and Customs Administration, the CBAM covers goods such as iron, steel, cement, fertilizers, aluminium, and electricity. From October 2023, businesses importing these products into the EU must start reporting emissions data, with the full mechanism, including financial adjustments, coming into effect in 2026. The Netherlands Emissions Authority (NEa) will play a key role in overseeing CBAM compliance.

For logistics service providers and their clients, the CBAM introduces several new challenges and considerations. Here’s how it impacts the logistics sector:

Tomas van der Maarel

Increased Reporting Requirements

Carbon Border Adjustment Mechanism

One of the immediate implications of the CBAM is the requirement for detailed emissions reporting. Importers must provide verified information about the carbon content of their goods. This adds a layer of complexity to supply chain operations, necessitating robust data management systems and closer collaboration with suppliers to gather accurate emissions data.

Customs Clearance - Fiscal Representation - HQ (2)

Supply Chain Diversification

To minimise the impact of the CBAM, businesses might consider diversifying their supply chains. This could involve sourcing materials from regions with lower carbon footprints or investing in more sustainable production practices. Logistics providers play a pivotal role in advising clients on alternative supply chain strategies and identifying greener logistics solutions.

Sourcing materials from regions with lower carbon footprints can significantly reduce the overall emissions associated with your supply chain. For instance, opting for suppliers in countries with stringent environmental regulations and lower emission standards can help ensure that the carbon footprint of your imported goods is minimised. Additionally, exploring local suppliers within the EU can not only reduce transportation emissions but also align with CBAM regulations more closely, as these suppliers are already compliant with EU standards.

Steps for businesses to prepare for CBAM

Given the significant impact of the CBAM on logistics and supply chains, proactive preparation is vital. Here are key steps businesses can take to navigate the CBAM landscape:

  • Become familiar with the CBAM process and reporting of emissions

Effective data management is at the heart of CBAM compliance. It is important to have close relationships and discussions with your suppliers. Suppliers must know which data they should provide to ensure your organisation is transparent and accurate in emissions reporting. Leveraging digital tools and platforms can streamline data collection and analysis, making it easier to meet CBAM requirements.

  • Collaborate with logistics providers

By working closely with your logistics partners, you can gain insights into the most efficient and compliant shipping routes. Logistics providers can also offer expertise in managing the additional reporting requirements and navigating the complexities of the CBAM.

Tomas van der Maarel, Business Development Manager at Broekman Logistics, emphasises, “Navigating the CBAM requires organisations to focus on a detailed planning and collaboration with logistics service providers. By leveraging our expertise, businesses can ensure compliance and minimise disruptions to their supply chains. For example, optimising transportation routes to reduce fuel consumption and emissions, utilising multimodal transport solutions that combine rail, road, and sea transport eventually helps partners to minimise environmental impact.

  • Assess cost implications

Conduct a thorough assessment of how the CBAM will impact your logistics costs. Identify which products and supply routes are most affected and explore strategies to mitigate cost increases. This could involve renegotiating supplier contracts, optimising shipping routes, or exploring alternative materials with lower carbon footprints.

  • Create engagement plans and explore sustainable alternatives

Consider integrating more sustainable practices into your supply chain to reduce overall carbon emissions. This might include investing in energy-efficient technologies, adopting renewable energy sources, or exploring carbon offset programs. This enhances your company’s reputation and commitment to environmental responsibility.

Role of Technology in CBAM Compliance

Embracing advanced technologies can significantly ease the transition to CBAM compliance. Digital platforms for emissions tracking, blockchain for transparent data sharing, and AI-driven analytics for optimising logistics operations are just a few examples of how technology can support businesses. Investing in these technologies can provide a competitive edge and ensure a smoother adaptation to the new regulatory environment.

Tomas van der Maarel further adds, “Incorporating advanced technologies is essential for CBAM compliance. Our strategic planning must account for these risks to maintain seamless operations.”

Conclusion

The introduction of the Carbon Border Adjustment Mechanism marks an important shift in how the EU addresses carbon emissions and fair trade. This landmark regulation aims to level the playing field by ensuring that imported goods bear the same carbon costs as those produced within the EU, thereby preventing carbon leakage and promoting global climate goals. For businesses relying on logistics service providers, understanding and preparing for the CBAM is crucial. By strengthening data management, collaborating with logistics partners, assessing cost implications, and exploring sustainable alternatives, businesses can navigate the CBAM effectively. As the CBAM implementation progresses, staying informed and proactive will be key to maintaining compliance and ensuring the resilience of your supply chain.

Contact our logistics expert

Tomas van der Maarel

Manager Business Development
+31620021614