CBAM for Auto Parts Too? New Study Recommends Expansion
CBAM Weekly – Issue 63
The Current CBAM Scope Is Limited
The Carbon Border Adjustment Mechanism currently applies only to basic materials and a limited number of intermediate products in sectors such as iron, steel, aluminum, cement, and fertilizers. Finished products and many intermediate goods along the supply chain are not yet covered. This gap is becoming increasingly relevant as global trade structures shift and free allocation in the EU Emissions Trading System is gradually replaced by CBAM certificates through 2034. A new study, commissioned by the German Environment Agency (UBA) and conducted by the Öko-Institut, examines this question in detail. The UBA also oversees the German Emissions Trading Authority, which is responsible for CBAM enforcement in Germany. Using the automotive industry as an example, the study analyzes whether downstream products along the value chain-such as wheels, brakes, and crankshafts-should also be included in the CBAM scope in order to avoid carbon leakage and ensure fair competition.
Findings: CO₂ Cost Shares and Trade Patterns
The study reviews nine product categories, including already CBAM-covered precursors such as flat and forged products, as well as auto parts not yet included. At a CO₂ price of €100 per tonne and full CBAM implementation, CO₂ cost shares amount to up to 28 percent for flat steel products and between 4 and 12 percent for forged parts. These products are already covered by CBAM. For wheels, brakes, crankshafts, and other components, the estimated CO₂ cost shares range between one and six percent. Even if these shares are lower, the high economic relevance and import volumes of these products highlight the need for closer examination. The study shows that imports from countries such as China, Turkey, and Morocco are increasing. These countries generally lack comparable CO₂ pricing systems, putting European manufacturers at a disadvantage.
Industry Voices: Competitiveness and Bureaucracy
As part of the study, 13 stakeholders from the automotive and supplier industries were interviewed. These included producers of basic materials as well as manufacturers of auto parts and their associations. The feedback paints a clear picture: the competitiveness of European industry is increasingly under pressure. High energy prices, stagnant demand, and a shift in global production locations are key factors. At the same time, the administrative requirements of CBAM are already being felt. An expansion to additional product groups would further increase this burden. Interviewees advocated revising reporting requirements and adjusting the de minimis threshold before new products are added. They also raised the risk of circumvention via alternative tariff classifications if certain products remain excluded.
Recommendations: Data-Driven and Gradual
The study proposes clear criteria for expanding CBAM. The main factors should be emissions intensity, trade intensity, and the risk of circumvention through misclassification. Any extension should be based on a careful cost-benefit assessment, taking into account emission levels, import volumes, and the number of already covered precursors. A phased introduction of new rules is also recommended. This would allow companies and authorities to better prepare for new reporting obligations and support implementation in a targeted way. These recommendations were confirmed at a technical workshop in September 2024, which included representatives from industry, government, and academia.
Outlook: Decision Expected by End of 2025
The European Commission is currently examining whether to extend CBAM’s scope. A recommendation to include additional products-explicitly auto parts-is expected by the end of this year. If adopted, reporting obligations for numerous companies could change within a short period. Importing companies should therefore act early. This includes analyzing emissions-relevant supply chains, reviewing tariff classifications, and discussing potential reporting requirements with non-EU suppliers.
Support in Qualitative Impact Assessment
We are happy to support you in examining to what extent such an expansion would also affect your company and supply chains. Please feel free to contact us directly (helge@kolum.earth).