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European CO2 regulations will greatly affect global logistics

Monday 10/05/2021
Green Deal

The elaboration of the European climate laws is at cruising speed. The additional CO2 surcharge will ensure a price correction on imported goods. All this is expected to be the start of a shift in the existing globalized logistics flows. What are the latest updates?

Green Deal will be a real deal for European climate ambitions

With the Green Deal, the EU is highlighting European climate ambitions. From its announcement in December 2019, it was clear that the EU means business. By 2030, greenhouse gas emissions must drop by 60% to the 1990 benchmark and by 2050 Europe must even become climate neutral. To prevent these ambitions from triggering the relocation of even more industrial activities to parts of the world with less stringent environmental standards, the EU will protect its own economy by introducing a so-called Carbon Border Adjustment Mechanism (CBAM). It is safe to state that the CBAM is a CO2 tax on goods that are imported into the EU.

March 10, 2021: European Parliament approves the development of CBAM

The European Union is moving forward. Progress is being made with the drafting of legislation and the regulatory framework for CBAM. On Wednesday, 10 March, Parliament passed a resolution on the drafting of CBAM. The resolution was passed by 444 votes in favor, 70 against and 181 abstentions.

The resolution emphasizes the EU's increased ambition in the area of ​​climate change, but it wants to prevent a further relocation of the EU manufacturing industry to non-EU countries that have less strict emission regulations. Setting a carbon price on certain goods imported from outside the EU will ensure a global level playing field and an incentive for small EU and non-EU industries to decarbonize in line with the goals of the Paris Agreement.

Next milestone: 1 July 2021, presentation of CBAM to European Parliament.

Before the summer, the EU wants to present a detailed CBAM and thus the high-level vision of the Green Deal will be made concrete. The CBAM will be submitted to the European Parliament for a vote in the second quarter of this year, latest by 1 July of this year.

What does this mean for the industry and international Supply Chain networks?

The paths that international trade has taken in recent decades will be tested against this new reality. New balances will have to be found, because the starting point is that globalized logistic flows must become a lot more sustainable, and chances are that these logistical networks will gradually be reorganized.

In some sectors, the CBAM market price correction will lead to significant shifts in the cost model and the re-evaluation of global logistics networks. Certain activities could even be brought back to the West. The evolutions in industry 4.0, especially in the manufacturing industry, together with the energy turnaround (including massive investments in hydrogen) will partly support this transfer of manufacturing activities to an aging Europe. As a result, the physical Supply Chain might effectively become shorter and more sustainable in a number of sectors.

Stay informed

If you would like to stay informed about the further developments of the Green Deal/CBAM and the impact on the industry, please let us know or subscribe to the Moore Supply Chain Newsletter.

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Joël Wijns

Joël Wijns

Partner Business Consulting

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