It is increasingly likely that the European Union (EU) will impose additional taxes on imports from Bosnia and Herzegovina (BiH), which could be a significant economic blow. However, this impact can potentially be avoided, and whether it is avoided depends solely on BiH itself.
The EU plans to financially burden not only imports from BiH but also from all non-member countries. The proposed measure, called the Carbon Border Adjustment Mechanism (CBAM), will tax imports of goods whose production emits carbon.
BiH, like all other countries that are not members of the EU, has the possibility to avoid CBAM, which means that the EU does not want to fill its budget additionally. Namely, CBAM can be avoided by introducing the EU Emissions Trading System (EU ETS), which has existed in the EU since 2005. The EU ETS implies that companies can buy and sell quotas or “the right to pollute” from each other.
The EU ETS would fill the budgets of BiH, while CBAM would fill the EU’s budget. BiH committed to establishing an EU ETS under the Sofia Declaration, and Borjana Kristo, Chair of the Council of Ministers, promised that this trading system would be set up.
However, Artur Lorkowski, Director of the Energy Community, recently expressed doubts about BiH’s ability to meet all conditions to avoid CBAM. These conditions include adopting a national electricity law and establishing a state-level electricity exchange.
Risk of major economic blow
Vjekoslav Vukovic, President of the Foreign Trade Chamber (FTC) of BiH, explained the potential impact of CBAM on trade with the EU, where BiH exports 70% of its products. He highlighted the possible financial losses for the BiH economy.
“Full implementation of CBAM would affect more than 40% of BiH’s exports to the EU, including aluminum, steel, iron, fertilizers, electricity, and cement. Without EU ETS, BiH could lose 300 million BAM by 2030, which would end up in European countries,” Vukovic emphasized.
Regarding the potential for job losses, wage reductions, and company closures due to CBAM, Vukovic noted that small and medium-sized enterprises may struggle to operate without profit or to absorb losses to mitigate or remove negative effects.
“We hope that companies will remain competitive, improve their operations, retain existing jobs, create new market opportunities, and expand their production capacities to enable new employment,” he added.
He was asked which sectors would be most affected by the introduction of CBAM.
“In the first phase of the application, this regulation applies to six sectors, namely the production of steel and iron, aluminum, electricity, hydrogen, cement, and fertilizers. According to FTC’s analyses, the product groups of aluminum, iron steel, and electricity will be the most affected” he answered.
The President of FTC BiH highlighted data that he believes indicate that local companies are partially aware of what the EU ETS, or CBAM, means. He indicated that they obtained this information through a survey conducted in December last year.
“Analysis of responses from 76 companies found that 58.7% of companies do not know what the direct and indirect CO2 emissions of their products are, but they want to learn more about it, while 38.7% are aware of these emissions. Furthermore, 42.1% of companies are unsure if they need to report emissions from precursors (chemical compounds) of their products, while 36.8% know if they need to report emissions from precursors, i.e., emissions from their suppliers,” Vukovic explained.
According to Vukovic, the analysis revealed that primarily large companies have shown readiness to enter CBAM, with some already setting aside funds to pay this tax, Klix.ba writes.
E.Dz.
