The estimated total economic costs imposed by CBAM (certificate costs) could amount to roughly 730 million EUR per year for the Cement Industry.
Understanding the economic implications of the Carbon Border Adjustment Mechanism (CBAM) is crucial for businesses, especially in the cement industry. This article delves into the estimated costs, key importers, and the impact of CBAM certificates on the cement sector. Using data from Eurostat and emission factors, we aim to shed light on the potential financial burden for Extra-EU importers.
I recently tried to estimate indirect associated administrative costs for CBAM compliance while mentioning that these will be dwarfed by the direct costs assuming that CBAM certificates will have to be bought and surrendered to the extent of the actual allocated amount of carbon emissions.
The CBAM in its current stage does include six main sectors, one of which is cement. The products affected are determined by the combined nomenclature (CN) that is used in the "customs reporting system" as well. Eurostat does offer quite an extensive database on international trade, where those products can also be found if you search for these very CN codes. Finding the right data can be tricky as there are certain tariff regimes and complications like inward processing. However, once the right dataset is identified, the total annual import from outside the EU is available for basically every product.
Cement clinker is one of six cement CN-codes under the CBAM regulation. Cement clinker is primarily used to produce Portland cement, which is the basic ingredient for making concrete. Portland cement is made by grinding cement clinker along with gypsum and other additives. This mixture is then heated to form a fine powder, which is used as a binding agent in concrete and mortar. These cements are then used in the production of other products like aluminous cement.
This is important because our first assumption will be the embedded carbon emissions factor (EF, dimensionless, expressed in tons of CO2 per ton of product). The data for each product is almost impossible to obtain as you would need actual emission data from the production plants. There is the EU-ETS however and the specific carbon emission factor for cement clinker was reported to be 0.795 across 34 installations in 2018 for plants in Germany. This value is more or less constant between 2005 and 2018. We will use this value as a conservative reference value and come back to establish a value for our analysis later.
The total Extra-EU imports (there is also Intra-EU imports, Germany being the largest Exporter) increase during the selected time-period with a slight reduction in 2022.
We do not know how product streams will develop over time but for the purpose of further discussion we will use the import data of 2022 of all six cement products combined. Turkey, Algeria and Ukraine are by far the largest importers of the total amount across all products. They account for 7,66 million tons of a total imported volume of 11.23 Million tons. The countries that follow are Tunisia and the United Kingdom. There were shifts in ranking over time, especially Turkey importing the highest amount of all countries (intra and extra-EU) in 2022, whereas the total average specific tax value for the six products increased from 63 EUR in 2021 to 78 EUR for all Importers (Extra-EU).
Case study Turkey
Here is the part where the data become interesting. Turkey imported a total amount of all six goods combined of 4.57 Million tons at a customs value of 333.4 million EUR. To determine the total CBAM certificate costs (assuming zero free allocation) we require an emission factor and certificate costs which we will multiply together with the total imported quantity. The latter we will just set at 80 euros. Nobody is able to predict the price, but assuming that the price would rather not decrease in the future would probably be considered reasonable by most people. We will use an emission factor from a Turkish paper that specifies a value of 0.813.
Now, why is this reasonable? We have six different goods and their emission factor (EF) will differ. However, since all products are mainly derivatives from cement clinker, the EF of the other goods, including embodied emissions of their precursors, will only be slightly higher than the one for cement clinker for reasons outlined above. If we compare this value from the study to the EU-ETS figure from plants in Germany we can assume that this value is conservative since the EU-ETS in this regard only accounts for direct emissions which for cement clinker also include process emissions (calcination).
It does become apparent now why the EU wants importers to include upstream emissions of precursors ("input materials") for the complex goods ( "‘complex goods’ means goods other than simple goods", any questions?) because otherwise you will dodge the CBAM quite a bit by importing processed Portland cement instead of clinker as this basically involves grinding (and adding some stuff) and the associated emissions at your plant are much lower (indirect emission from electricity).
So what are the costs in our example of Turkey? 297.4 million EUR, and yes, this is roughly 90% of the total customs value.
Applying the same rationale and EF to all other importing countries the total economic burden amounts to 730 million EUR.
Feel free to download the full excel sheet of cement imports including raw data here:
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