Will the EU’s “carbon tariff” lead to higher screw costs?

On April 18, 2023, the European Parliament approved three important draft EU laws linked to climate change in the “Fitfor55” 2030 climate package, including the EU Carbon Border Adjustment Mechanism (CBAM), referred to as carbon tariffs. So, what impact will the passage of carbon tariffs have on the screw industry? Will it lead to increased screw costs?

Before that, we need to know what is carbon tariff (CBAM)? Carbon tariffs refer to the imposition of additional duties on the carbon emissions embedded in goods imported into the EU. To put it simply, CBAM achieves “carbon parity” by adjusting the pricing difference of carbon emissions in commodities inside and outside the EU border.

Among them, the goods covered by the carbon tariff (CBAM) include iron, steel, cement, aluminum, fertilizer, electricity, hydrogen and indirect emissions under certain conditions. In addition, downstream products of screws and bolts and similar steel products are included. Merchants who import these goods need to pay the difference between the carbon price in the producing country and the price of carbon allowances in the EU ETS. The carbon tariff (CBAM) will be phased in from 2026 until 2034.

Therefore, if EU countries want to order screws, the cost of screws will increase again when the implementation is officially started. In order to ensure their own profits, EU merchants will also require screw manufacturers to reduce prices, or find screw manufacturers with lower prices, or increase the prices of their products.

However, if faced with high carbon tariffs in the later stage, EU businessmen will also consider the relocation of the overall industry, whether to relocate factories to countries with low labor force, and control the cost of products. Because their product accessories will not only involve screws and bolts, the more the merchants of goods related to carbon tariffs, the higher the cost they will face.

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