The implementation of the Carbon Border Adjustment Mechanism (CBAM) marks a turning point in the European industrial landscape, directly affecting the production of goods for both European companies and international producers. This initiative represents a significant step towards sustainability, questioning the adaptability and resilience of industries to new carbon emission regulations. Of particular interest is the automotive industry, known for its major contribution to the European economy, with an impressive turnover of approximately 411 billion euros in 2021. This industry, essential for European economic dynamics, highlights the fundamental role of auto equipment manufacturers, who generate three-quarters of total revenues (approximately 318 billion euros), while the auto component suppliers segment contributes about a fifth to this figure.
A defining aspect of the automotive sector is its considerable dependence on raw materials, especially steel, essential for various vehicle components and structures. The auto industry accounts for 26% of total steel consumption in Europe, emphasizing its importance in the raw materials value chain. Moreover, about 55% of the entire manufacturing industry is characterized by intensive steel consumption, underscoring the significant role of this sector in the materials economy. Particularly, the auto industry stands out with a 12% contribution to the intermediate consumption of steel, thus consolidating its position as a main player in the raw materials market.
Given this context, CBAM represents a pressure factor for the automotive industry, requiring strategic adaptations to meet new sustainability and resource efficiency requirements. Companies will need to navigate a changing landscape, assessing the potential impact on supply chains, operational costs, and market competitiveness. In this era of green transition, the industry’s ability to innovate and adopt more ecological practices will be crucial for long-term success. Thus, CBAM not only stimulates the automotive and steel industries towards a more sustainable future but also offers an opportunity to redefine industrial production paradigms in line with the European Union’s climate objectives.
In the current context of the European Union, where there is a focus on reducing greenhouse gas emissions, the Carbon Border Adjustment Mechanism (CBAM) represents a significant initiative. Its purpose is to balance the competitiveness of the EU industry against external producers not subject to the same strict emissions regulations. The economic impact of CBAM on the automobile industry, a key sector for the European economy, is a subject of great interest but difficult to quantify accurately at the current stage.
CBAM marks a first in the EU’s efforts to combat climate change, with a potentially significant impact on production costs and, consequently, on the selling prices of automobiles. It is anticipated that the introduction of costs associated with CO2 emissions into the supply chain will lead to an increase in the prices of essential components and materials, such as steel and aluminum. This increase could only be avoided if global suppliers adopt emission reduction measures, aligning themselves with the EU’s sustainability objectives.
Imports of metals such as iron, steel, and aluminum are vital for the European auto industry. In 2021, the EU imported a considerable proportion of its aluminum (47%) and iron and steel (26%), with a total impressive volume. The recent energy crisis has amplified the dependency on imports, also highlighting the differences in production costs between the EU and producers outside the community bloc.
Materials such as steel and aluminum are fundamental in vehicle construction, representing a significant part of a vehicle’s mass. The emissions associated with the production of these metals are substantial, and CBAM aims to put pressure on producers to adopt cleaner technologies. In this context, the price of emission certificates, which has seen a significant increase in recent years, plays a key role. The price is expected to remain stable in the short term, but the long-term trend indicates a potential increase, especially with the expansion of the ETS scope and the introduction of CBAM.
In the long term, it is anticipated that the introduction of CBAM and adjustments to the ETS policy will result in an increase in the costs of essential raw materials such as steel and aluminum. This will have a significant impact on the automobile industry, especially on suppliers who largely depend on these materials for the production of vital vehicle components.
Therefore, while the precise effects of CBAM on the economy and auto industry can only be estimated in retrospect, it is clear that this initiative has the potential to stimulate the ecological transition. However, to maintain competitiveness and minimize negative economic impact, it is essential that both European and global producers embrace innovations and technologies that reduce greenhouse gas emissions.
A significant increase in the price of carbon dioxide (CO2) emission certificates, within the European Union’s Emissions Trading System (ETS), is anticipated to considerably influence the final product prices in the auto industry in the near future. This dynamic is possible if auto producers decide to pass on the additional costs, generated by the acquisition of more expensive emission certificates, to consumers.
However, there are uncertainties about how much this price increase will affect consumer demand. Another relevant aspect is the impact of the Carbon Border Adjustment Mechanism (CBAM) on reconfiguring the auto industry’s supply chains. For example, German car manufacturers have already produced twice as many cars outside the European Union compared to their domestic production