With the Carbon Border Adjustment Mechanism Tax going live in January 2026 many companies are being proactive in advance. The CBAM is being introduced as a protective mechanism against imports from other countries who have done little to curb carbon emissions. The EU is going to charge those countries via an adjustment tax which is designed to protect manufacturers in the EU who have already made the required investments to reduce their carbon emissions.
IKEA has been busy planning ahead using Hapag-Lloyd shipping lines latest bio fuels which is called Ship Green offering 100% carbon free fuels via a waste residue bio fuel. Using this new fuel for shipping their goods IKEA will reduce an estimated 100,000 tons of carbon emissions over a 12 month period.
This is where shipping lines are having to make the changes in order to keep their clients with many vessels now using Methane and also Ammonia dual fuel engines. This will allow suppliers and manufacturers to not be overly affected once the new taxes come into effect. One can expect consumers are going to be hit with the newly inflated taxed goods come 2026 and getting on top of these costs now will benefit those companies who have been proactive and not reactive.
Back in 2022 coZEV was formed which is the Cargo Owners for Zero Emissions Vessels which the likes of Amazon and Ikea are clients. Biofuels are not the ultimate answer and Methane and Ammonia are seen as the carbon free fuel of choice, but this is still very early days with fleets needing to convert over.
This year alone has seen 47 orders for vessels with Methane drive systems which is already up by nearly 50% on 2023. LNG fueled vessels which was once seen as the answer for carbon free fuel is actually slowing down in popularity with Methane out on top and Ammonia expected to be the front runner by 2030.
We all know this type of change is not going to happen overnight and is a process due to the huge costs of converting current fleets. IKEA and Amazon have set their sights on carbon free shipping by 2045 and in the meantime reducing whatever they can.
How much will this new tax inflate prices even more is the question that no one knows the exact answer. Some suggest it will be somewhere between 5 and 15% depending on the product as each one has different taxes involved. What type of impact will this have on the EU economy and will exporters and importers look for markets elsewhere? No one quite knows all the implications and CBAM could easily back fire on the EU if the rest of the world is not ready or feels they are being bullied and trades elsewhere.
