Over the last month there have been many more articles discussing CBAM and what it means for everyone. Green is not always good news as this is going to hit everyone in their pockets. Every company has a carbon foot print and this is where this is all heading as there is going to be a cost associated with everything we do.
CBAM stands for the Carbon Border Adjustment Mechanism which goes live on January 1st 2026 and will change how importers and exporters operate with the European Union and the rest of the world. This is nothing more than a tariff that is designed to penalise countries that are not green in manufacturing.
The aim of these extra carbon taxes is to level the playing field of products manufactured in the EU versus similar products manufactured using higher carbon emissions. The first products affected are iron and steel, aluminum, fertilizers, hydrogen and electricity. The other products will follow shortly afterwards so every single item will be affected.
Many manufacturers in Europe sent their production off shore where there was no real environmental regulations with regard to pollution. Saving money and making higher profits which is now going to come back and bite them hard.
This is now about to drastically change due to the carbon those products emit during manufacturing now being costed in via a CBAM certificate. These certificates have to be purchased by the importer and exporter and why logistics companies are having to get involved and understand how this will impact their businesses. These are drastic changes that need to be learned as every import and export is affected.
Over the next 6 months suppliers and everyone involved in trade will be learning trying to calculate not only the best shipping routes, but also which companies and countries are now cheaper or more expensive.
A good example of is is China supplies over 50% of the world's aluminum and now will be up against Dubai's Aluminum solar smelter who will have a lower carbon emission product making it more desirable and cheaper. Dubai could become the world's aluminum hub and how supply can quickly shift.
In January 2026 we will see importers and exporters buying and surrendering carbo certificates relating to their shipments. This will be heavily regulated by the EU ad will generate billons in revenue which is meant to help pay for the clean up of carbon in the atmosphere. Seeing is believing I guess as personally I see this as another excuse for generating more revenue under the guise of being an environmental friendly tax.
The current quarterly reporting includes the goods and quantity shipped, origin, method of manufacturing, embedded emissions (both direct and indirect) and the carbon price paid in the country of origin. This report when this goes live will include a separate carbon billing.
Logistics companies could expand their businesses by holding CBAM certificates and charging extra for this service. Companies will have to be fully compliant anyway so I guess the majority will do this in house.
Governments need to be smart when negotiating the carbon deal for trade and after seeing the UK and what they have proposed is going to hit the country and it's people very hard. The truth is you need business people handling this and not some politician who has alterative agendas.
CBAM was going to be big news and maybe not so much as Trump has kind of upset the playing field for now and CBAM will just muddy the waters even more come January. The Chinese, South East Asia and India are going to feel the biggest bump from all of this as they have no intentions of decarbonizing. The Indian Commerce and Industry Minister hinted that India would just reciprocate the EU Carbon tax on any imports. This has been no hidden secret and we have all know about this for the last 5 years. If this is the plan to counter act this then India will surely lose out.
For those wondering I am no green nerd and only follow this kind of news as I am invested in VeChain which is also VeCarbon which is considered the gold standard in carbon emissions and is the blockchain being used by the EU for CBAM.