How HFAL is Ready for the CBAM Demand, our approach to the Carbon Border Adjustment Mechanism (CBAM)
The machinery and automotive industries rely heavily on steel imports to produce products that shape our everyday lives. However, the increasing demand for sustainable practices has pushed the European Union (EU) to introduce Carbon Border Adjustment Mechanisms (CBAM) on steel imports to limit the impact of carbon emissions on the environment. The tax system creates a penalty for steel producers who do not use sustainable manufacturing practices, giving buyers an incentive to choose environmentally friendly options.
Currently, India's exports of CBAM products to the EU represent 11.2% of total exports, which amounts to $8.22 billion. Additionally, these CBAM products account for 6.9% of India's exports to the rest of the world. Sectors such as iron ore concentrates, steel products, and iron and steel are expected to be significantly impacted by the implementation of CBAM.
Fortunately, companies like Hira Ferro Alloys Ltd (HFAL) are leading the way in sustainable steel production, creating an opportunity for Indian steel manufacturers to be on the right side of imports. With over 30 years of experience in sustainable steel manufacturing, HFAL is in a prime position to meet the demands of CBAM. We are closely monitoring and preparing for the implementation of the Carbon Border Adjustment Mechanism (CBAM) proposed by the European Union (EU). As a key player in the [ferroalloys industry/market], we understand the importance of aligning with global efforts to reduce carbon emissions and promote sustainable practices.
What is the new CBAM regulation
The CBAM initiative by the EU is aimed at enforcing climate change policies on imported industrial goods. By implementing a tax system based on the amount of CO2 emissions produced during manufacturing, the EU is trying to promote sustainable practices and discourage carbon-heavy manufacturing. The CBAM creates a penalty on imports that exceed a certain level of emissions, encouraging companies to adopt more sustainable manufacturing practices.
In particular, the CBAM is expected to hit imports from China, Russia, and India significantly. Companies that do not comply with this tax policy will either have to accept the tax burden, pass it on to buyers or become less competitive, leading to a potential loss in market share. Indian steel manufacturers stand to suffer unless they improve their sustainability practices.
CBAM Implementation Timeline
The EU plans to introduce the CBAM in phases, with the initial phase focusing on iron and steel imports. The precise timeline for the implementation of CBAM is subject to ongoing discussions and negotiations, but it is expected to take effect in the next few years. The CBAM is set to be phased in gradually, with a transition phase expected to begin in 2023 and a full implementation phase planned for 2026. During the transition phase, importers will have to submit quarterly reports on the emissions intensity of their imported goods. The EU, for its part, will develop an emissions profile that will act as a reference for each product category. The final phase will require importers to buy CBAM certificates covering their products' carbon content, with the proceeds invested in the EU's climate action programs.
How HFAL is Poised to Meet CBAM demands
HFAL has long been committed to sustainable manufacturing practices, winning numerous awards and certifications, including ISO 9001:2015, ISO 14001:2015, and OHSAS 18001:2007. Our organization's commitment to sustainability and green manufacturing ensures that our operations align with the demands of CBAM.
The CBAM represents an opportunity for us to showcase our commitment to environmental responsibility and carbon neutrality. We have already taken steps to measure, manage, and reduce our carbon emissions, ensuring that we are prepared to provide accurate data on our products' carbon footprint to EU importers.
To comply with the CBAM requirements, we have implemented comprehensive systems and processes to track and report our CO2 emissions. By doing so, we can establish our position as a reliable and transparent supplier, providing the necessary information to EU importers and meeting the certification standards set by the EU competent authorities.
Embracing Green Energy
HFAL has invested heavily in renewable energy sources, including solar, wind, and biomass power, allowing us to reduce our carbon footprint when producing steel. The company has implemented a 20MW captive thermal power generation and has an upcoming 55 MW Captive Solar Power Plant. By harnessing the power of the sun and wind, we are taking significant strides towards a greener future.
By using biomass and solar energy, HFAL has already reduced its reliance on coal and, in the process, reduced its carbon footprint. These initiatives have led to a remarkable saving of 19,000 MT of coal per annum and a 34.5% reduction in greenhouse gas emissions. As a result, we are poised to take on this CBAM challenge and excel.
Part of HFAL's Zero Carbon Vision by 2030
HFAL's commitment to reducing carbon emissions is not limited to CBAM. We have a zero-carbon footprint vision, and our efforts are targeted towards that goal. Thus, our vision aligns perfectly with CBAM. Our methodology towards achieving our zero-carbon vision translates to sustainable steel production across all operations.
A Proactive Approach
HFAL is already implementing CBAM-like measures internally, which have allowed us to quickly shift direction when regulations catch up with sustainability trends. The management of HFAL has been driving changes in the industry and is committed to green initiatives. As a result, a majority of our investments go towards R&D and infrastructure, ensuring that the organization is ready to meet any demand, including the CBAM.
The introduction of CBAM is set to disrupt the steel import industry, with India's steel exports in particular facing an uncertain future. However, companies like HFAL, with its unwavering commitment to sustainable manufacturing, are ready to meet the demand head-on. Our investment in renewable energy resources, manufacturing processes, compliance to various regulations, and zero-carbon vision sets us apart from other Indian steel manufacturers.
The CBAM is a timely reminder for companies to invest in green energy measures and adopt sustainable production practices. Requisite efforts on the part of steel manufacturers would lead to fewer taxes on importers, also leading to other countries adopting similar initiatives towards climate sustainability. Not only does it make good environmental sense, but it also makes sound business sense.
We believe that the CBAM offers an opportunity for our industry to become more sustainable and resilient. We view it as a catalyst for driving innovation, improving overall industry practices, and encouraging the transition to greener alternatives. We are confident that our commitment to reducing carbon emissions and embracing cleaner technologies positions us favorably in the changing market landscape.
