During his presentation at the SteelOrbis 2024 Fall Conference & 91st IREPAS Meeting held in Paris on September 15-17, Louis Redshaw, CEO/founder of UK-based Redshaw Advisors Ltd., focused on the financial impacts of the EU Carbon Border Adjustment Mechanism (CBAM) and strategies for cost mitigation.
Mr. Redshaw stated that the CBAM, which will apply to exporters from all non-EU countries (including the UK), aims to tackle carbon leakage and create fair competition for EU industry. Noting that over 4,000 large companies (about 40 percent of EU emissions) have been steadily decarbonizing due to the decreasing free allocation of carbon credits, he indicated that, with the phasing out of the free allocation of EU ETS [Emissions Trading System] allowances from 2030, carbon costs, which are currently at €70/mt, will increase to €98/mt by 2026, to €150/mt by 2030 and to €249/mt by 2034. Regarding the costs in Turkey, he stated that in 2030 the CBAM cost per 100,000 mt of steel will be €18.56 million, while the cost will have risen to €47.23 million per 100,000 mt of steel by 2034.
As for strategies for carbon cost mitigation, Redshaw noted that the EU CBAM certificates are difficult to use to hedge costs, being non-tradable instruments and having a two-year validity, not currently being available for purchase. Meanwhile, he stated that EU allowances can be used to hedge costs as they are tradeable instruments in a liquid, long-established market, having no storage limits or costs, and they can be traded from anywhere in the world, by any person, or company.
