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bne July 2021
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The cost of joining the global and aluminium that export to the
movement towards net zero is
not yet fully known, and both governments and corporations with the highest levels of both greenhouse gas (GHG) emissions and energy intensity face the highest costs for carbon.
This threatens to put them at a competitive disadvantage, as they have to include the cost of carbon
in both their budgets and in their environmental, social and government (ESG) reputation.
However, not all governments have set carbon prices, while the EU has proposed putting a carbon price on imports of the most carbon-intensive products, such as steel, cement and aluminium, not just on domestic production.
Prices
The International High-Level Commission on Carbon Prices, a coalition of governments and experts supported by the World Bank, recommends that the price of emissions should be between
EU pay for carbon credits through its proposed Carbon Border Adjustment Mechanism (CBAM).
The CBAM aims to make exporters to the EU pay a similar price for carbon as domestic producers.
Leaked drafts of the CBAM rules state that the price EU importers must pay for imported goods, such as Russian steel, would be the same as the price
of EU ETS allowances. Importers would need report the carbon content on their imports to a new CBAM Authority.
The CBAM could be introduced in
a transitional phase from 2023, with a full roll-out from 2026.
Russia
Russia is especially exposed to new carbon costs in the EU, as it is one of the biggest energy-intensive exporters to the EU, with exports of fertiliser, aluminium, steel, electricity and cement worth $9.5bn in 2019, according
to Deloitte.
“The International High-Level Commission on Carbon Prices recommends that the price of emissions should be between $40 and $80 per tonne by 2020, and $50 to $100 per tonne by 2030”
$40 and $80 per tonne by 2020, and $50 to $100 per tonne by 2030. Meanwhile, carbon prices on the EU ETS currently stand at around €52.
Meanwhile, the IMF said recently that carbon prices should rise to $75, $50 and $25 respectively for advanced, high and low-income emerging markets.
It claimed that this would achieve a 23% reduction in global emissions by 2030, enough to bring emissions in line with keeping global warming below 2°C, as called for by the Paris Agreement.
The EU’s Green Deal is set to make producers of steel, cement, fertiliser
Early estimates of the cost of CBAM credits range from $3bn per year, from the Russian Natural Resources Ministry, to a total of $60bn between 2022 and 2030 from KPMG.
The highest estimate puts the cost to Russian exporters at €6bn ($7.2bn) per year, Platts reported on April 22.
For just steel, a tax of €60 per tonne would cost $780-800mn per year for Russia’s steel exports to Europe, which stand at 13mn tonnes per year (tpy) and are worth $7bn, Russian Industry and Trade Deputy Minister Viktor Evtukhov said in November.
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