Understanding the Carbon Border Adjustment Mechanism and its Implications on Company X

Abstract

The European Union’s Carbon Border Adjustment Mechanism (CBAM) is a regulatory framework aimed at addressing carbon leakage and leveling the competitive landscape by imposing a carbon price on imported goods equivalent to that faced by EU-based producers. The primary objective of the thesis is to investigate how CBAM impacts SMEs importing steel into the EU, particularly in terms of compliance obligations and cost structures. This research was commissioned by Company X to provide them with a better understanding of the financial obligations CBAM imposes; more specifically, in determining projected costs for CBAM Certificates.

The theoretical framework for this thesis explores the key concepts relevant to understanding CBAM and its implications on international trade practicalities. The relevant topics include environmental economics, market-based environmental policies, and corporate sustainability.

This thesis employs a multi-method qualitative research approach, combining desktop research with a semi-structured interview with a representative from Company X. The research draws on primary data from the interview and secondary data from EU legislative documents, industry reports, and academic sources to gain a more in depth understanding of CBAM’s implications on an SME importing steel from outside the EU.

This research is concentrated on providing details on CBAM’s regulatory framework and operational timeline. This research establishes the current and future obligations Company X will concur with the implementation of CBAM. This thesis also provides the relevant information for calculating CBAM certificate costs, helping Company X anticipate future expenses and adapt its sourcing strategies.