The European Union (EU) carbon border adjustment mechanism (CBAM) started its transitional phase this week ahead of the full adoption of the scheme in 2026. Importers of goods with a high carbon cost, including cement, will have to report the direct and indirect CO₂ emissions associated with production. No financial penalty will be incurred during the transition period, but from 2026 onwards importers will have to start buying certificates at the EU emissions trading scheme (ETS) price. However, even the full version of the CBAM will be phased in with the cost of embedded emissions increased gradually from 2026 to 2034. Readers can catch up on the CBAM guidance for importers here.

Graph 1: Sources of cement and clinker imports to the EU in H1 2023. Source: Eurostat/Cembureau.

Global Cement Weekly has covered the EU CBAM frequently, but it is worth remembering which countries are most likely to be affected. According to data from Eurostat and Cembureau, the EU imported just over 10Mt of cement and clinker in 2022. This compares to around 2.5Mt in 2016. Graph 1 (above) is even more instructive, as it shows where the cement and clinker came from in the first half of 2023. Most of it was manufactured in countries on the periphery of the EU with, roughly, a third from Türkiye and a third from North Africa. These are the countries with the most to lose from the CBAM.

Graph 2: CO₂ emissions intensity for cement exports. Green signifies cleaner than the EU average, Red signifies more carbon intensive than the EU average. Source: World Bank.

Türkiye is the most exposed. Data from Türkçimento shows that it exported 3.4Mt of cement and clinker into the EU in 2022 or 13% of its total exports. Bulgaria, Italy and Romania were the main destinations for cement. Belgium, Spain and France were the main targets for clinker. Notably, more clinker than cement was exported to the EU. For context, in total Türkiye exported 18.5Mt and 8.5Mt of cement and clinker respectively in 2022. The US was the leading destination for Turkish cement at 9.7Mt and Ivory Coast for clinker at 1.3Mt. Türkiye seems set to tackle the problem that CBAM poses for its iron and cement sectors by introducing its own emissions trading scheme. One view expressed has been that if the country has to pay for its carbon emissions it would much rather pocket the money domestically than see it go to a foreign entity. A relative CBAM Exposure Index put together by the World Bank by June 2023 suggested that Türkiye would actually benefit slightly in comparison to some of its cement exporting rivals as the CO₂ emissions intensity of its cement exports was 4.85kg CO₂eq/US$. This study’s pivot point was 4.97kg CO₂eq/US$, putting Türkiye just across the line for increased competitiveness.

Cement export data for Algeria is harder to find but state-owned Groupe des Ciments d'Algérie (GICA) has been regularly issuing bulletins since 2018 detailing its cement exports. It previously had an export target of 2Mt for 2023 with destinations in Africa, Europe and South and Central America. Looking more widely, research by the African Climate Foundation (ACF) and the Firoz Lalji Institute for Africa at the London School of Economics and Political Science estimated that 12% of Africa’s cement exports ended up in the EU. It reckoned that the introduction of the CBAM and an EU ETS price of Euro87/t would reduce total African exports of cement to the EU by 3 - 5% if the EU ended its ETS free allowance. The World Bank CBAM Exposure study found that Egypt and Morocco were likely to become more competitive for cement exports but Tunisia less so. Unfortunately this analysis did not cover Algeria.

The third largest individual source of imports into the EU in the first half of 2023 was Ukraine. Research from the Kiev School of Economics estimated that the start of the CBAM would reduce the export volume of cement to the EU by 2 - 5%/yr. The World Bank study found that Ukraine would become less competitive as the emissions intensity of its cement exports was 7.62kg CO₂eq/US$. This would be compounded by the fact that more than 90% of the country’s cement exports ended up in the EU. However, since the EU backed the country when Russia invaded in early 2022, imposing the CBAM on exports has acquired geopolitical consequences. There has been lobbying on this issue from various sources, so this situation might be one to watch to gain a sense of how the EU might react when its sustainability aims clash with its political imperatives.

One major risk for the cement exporting countries soon to be affected by the CBAM is if other countries start to do the same in a domino effect before the exporters introduce their own carbon pricing schemes. Türkiye is clearly alert to this. Other countries are thinking the same way. The US, for example, has had senators discuss the merits of setting up its own version. It is also wise to using sustainability legislation to further its own economic ends as the Inflation Reduction Act in 2022 showed. At the moment the US needs lots of cement imports but were this to change then the case to enact a US CBAM might grow.

Finally, one should never discount the sheer amount of bureaucracy involved when dealing with the EU. The UK discovered this when it voted to leave the EU and now the rest of the world gets to enjoy it too! Christian Alexander Müller of Evonik told the Die Welt newspaper this week that Brussels had created a bureaucratic ‘Godzilla.' Another commentator noted that the European Commission only published its guidance document for importers on CBAM in mid-August 2023 and that helping export partners would be like teaching them Latin in just a few weeks. Bona fortuna!