Green Circle takes a look at the key takeaways for Construction
A seismic shift in global trade is underway, and construction sits squarely in the crosshairs.
The European Union’s landmark Carbon Border Adjustment Mechanism (CBAM) is now in force, introducing what’s widely termed a ‘green tariff’. This policy represents the most significant overhaul of environmental trade rules in decades. For the global construction industry, which relies heavily on imported steel, cement, and aluminium, this represents an immediate operational and financial reality. Companies selling these high-carbon goods into the EU must now prove compliance with low-carbon standards or face substantial costs.
The mechanism aims to create a level playing field, ensuring that EU producers adhering to strict decarbonisation rules are not undercut by imports from regions with weaker environmental standards. As Stéphane Séjourné, the European Commission’s executive vice-president for prosperity, stated, the reform brings “crucial and long-awaited measures” to secure European industrial competitiveness while supporting global decarbonisation efforts.
How CBAM Works
CBAM is designed to prevent carbon leakage, the phenomenon where production moves to regions with laxer climate regulations, undermining global emissions goals. It functions as a mirror of the EU’s internal Emissions Trading System (ETS).
Exporters to the EU must now purchase digital certificates to cover the carbon emissions embedded in their production processes. The price of these certificates will be pegged to the weekly average price of EU ETS allowances. Initially, this system applies to iron and steel, aluminium, cement, hydrogen, electricity, and fertilisers. For construction, the focus on steel, cement, and aluminium means the core structural and foundational materials of the industry are directly impacted. The EU has signalled its intent to significantly expand this scope by 2028 to include manufactured products like machinery and electric appliances, catching more of the construction supply chain in its net.
Direct Impact on Key Construction Materials
The new rules will reshape the cost dynamics and sourcing strategies for the industry’s most essential inputs.
Cement & Concrete This sector faces immediate pressure. Diana Casey of the UK’s Mineral Products Association highlighted the stark reality: decarbonisation efforts in Europe have made local production more expensive. UK cement imports have tripled to about a third of the market in a decade, largely from regions with lower environmental costs. CBAM aims to “level that carbon cost playing field,” which Casey views as “fundamental to securing the future” of domestic production. For construction firms, the era of reliably cheap imported cement is ending.
Steel from China for example could lose its price advantage over European steel. This may correct a major market distortion but also carries a risk: a global glut of high-carbon steel could be “dumped at low prices” into non-CBAM markets like the UK
Aluminium As a high-energy-intensity material, aluminium production carbon footprints will be scrutinised and priced. This will advantage producers using renewable energy and create new premiums for low-carbon aluminium, affecting everything from window frames to structural components.
Strategic Takeaways for the Construction Industry
The CBAM is the start of a new global standard for carbon in trade. Construction companies must adapt strategically.
Audit Your Supply Chain Immediately: You must now understand the embedded carbon footprint of every tonne of steel, cement, and aluminium you purchase, especially if sourced from outside the EU. This requires new levels of data transparency from suppliers.
Budget for New Costs: While the initial price impact may be “mild,” the costs will fluctuate with the EU carbon market price. Construction bids and long-term project budgets must incorporate a carbon cost factor for imported materials.
Re-evaluate Sourcing Partnerships: The economic rationale for sourcing certain materials from distant, carbon-intensive producers is diminishing. There is now a stronger financial incentive to partner with local suppliers or global producers who are leaders in decarbonisation.
Prepare for Expansion: With the EU planning to extend CBAM to finished goods like machinery by 2028, the compliance burden will grow. The smart move is to develop a comprehensive carbon accounting system now that can scale as regulations do.
View Decarbonisation as Competitiveness: This is the core intent of the policy. Investing in low-carbon design, material efficiency, and circular economy principles (like using recycled steel) is a direct method to future-proof your business against escalating carbon costs.
The construction industry is a major contributor to global emissions and CBAM is a powerful catalyst for transformation. Companies that move quickly to understand and adapt will secure the advantage, turning regulatory pressure into a foundation for sustainability.
Further Reading
https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en
Featured Image by Emilian Robert Vicol from Pixabay