CBAM: The new EU regulation

The recent approval of Regulations 2023/956 by the European Commission marks a new era of commercial relationships and approaches to combat climate change. The Carbon Border Adjustment Mechanism (CBAM), demarcates the strong position of Europeans about the accounting for carbon emissions in imported products. Today, we will talk more about the CBAM and how it affects the Brazilian market of exportation. Check below!

What is the CBAM

 CBAM is the mechanism of custom carbon taxes for products in the EU. It appears as an extension of the Emissions Trading System (ETS), a Cap&Trade market of the permissions of carbon already established in the UE. The main motivation behind the CBAM is the carbon price balance of imports, with the price paid if these products were manufactured, inside? the EU, ensuring that foreign products are subject to taxation standards similar to those imposed on European producers.

The EU is compromised to reduce carbon emissions by 55% by 2030 (compared to the 90 ‘s level) and reach a total of no carbon emissions by 2050. To achieve these hardcore (difficult) goals, the UE plans to progressively eliminate the concessions about free carbon emission. However, this move is a risk, the carbon leakage, is when a company transfers its production to a country with environmental laws not so strict. To counterbalance those risks, the CBUM was made for.

Implementation timeline

The CBAM implementation process will be realized in two stages::

• Transition Stage (October 1st of 2023): During this period, the European companies will have the responsibility of reporting the imports products emissions, and creating a database for future actions.
• Regular Stage (October 1st of 2026): After this date, only Authorized Declarat will be able to import products of CBAM products. It will be mandatory to calculate product emissions, acquire the corresponding CBAM certificates, and submit annual emissions and import reports. The lack of compliance will result in penalties.

For Brazilian exporters targeting the European market, this measure poses new challenges. In this way, less carbon-intensive products will be more attractive to European importers, as they will require fewer CBAM certificates, making them cheaper.

This is an opportunity for Brazilian companies that already monitor or are monitoring to decrease their CO2 emissions. These companies will be in a favorable position on the European market, since they will be subject to lower taxes. 

Since 2011, we have been certified by the Leather Working Group (LWG), demonstrating our commitment to sustainable leather production practices. Through this certification and conscious actions, we ensure that our leathers are of high quality and, at the same time, have a low environmental impact.

To find out more about our sustainable measures and initiatives, visit our website.