“Innovative Startups Decarbonising Hard to Abate Industries Will Benefit from CBAM Tax Laws”

1/17/20242 min read

Seratech’s non-executive director, Mike Eberlin, has said that while much of the discussion around CBAM (Carbon Border Adjustment Mechanism) is on taxing imports and encouraging other countries to implement a carbon tax, there is an added benefit for companies with zero carbon products, like Seratech: “The higher prices resulting from a CBAM will encourage innovation and reward low emissions startups for creating low carbon products”.

Mike added that CO2 reduction may be a global priority, but that it will only happen “if green products can command greater revenues resulting in greater profits”.

The initial focus of CBAM is on steel, cement, aluminium, hydrogen, fertiliser and electricity. The EU's initiative to tax embodied carbon is intended to come into action by 2026 in Europe and 2027 in the UK.

“In Europe they are currently testing the systems,” Mike explained. “This requires importers of these products to declare their carbon contents without being taxed”. A benchmark of the carbon intensity of the products from the different countries as well as reporting requirements are being put in place. In 2026 the EU will start taxing imports. “It will gradually ramp up over the next couple of years and at the same time withdraw the free allowances offered to these industries in the ETS (European Trading Scheme)”.

Most of these industries receive up to 75% of their carbon allowances for free. As these are removed, the CBAM protects the industries from carbon leakage (being undercut by untaxed imports). However, the import duty/tax will result in product prices increasing above inflation as the cost of the additional allowances has to be covered.

“In the EU we’ve seen carbon prices stabilise at €80/t. This means that if a metric tonne of cement produces 0.7 tonnes of CO2 then the current cost of purchasing the 25% of carbon allowances required is around €14/t of cement. Once the CBAM is fully in place and free allowances are withdrawn, the cost will increase to €56/t of cement - an increase of €42/t”.

Seratech's technology uses olivine rather than limestone as its base and thus does not need to emit CO2 from the decomposition of the mineral. In addition, the process absorbs CO2 to create two zero carbon products that replace cement.

“As Seratech’s products are zero carbon, they won’t generate a carbon tax and the additional revenue from the CBAM supports the business case increasing margins”. In this way, the CBAM becomes critical to supporting the development of novel zero carbon replacements in these hard to abate sectors such as cement.

Seratech's zero carbon Silica and MagCarb products can be used as a cement replacement in ready mix concrete and to make bricks, blocks, plasterboard and other building materials.

Key Questions Answered:

Will Seratech products be cost competitive to the cement they replace? Yes.

Will Seratech generate new revenue streams from its products? Yes, the process has three revenue streams, income from CO2 absorbed, income from the silica SCM into ready mix and income from the MagCarb binder into blocks, bricks and boards.

Will Seratech also assist in cutting the 8% (or 4 billion tonnes) of CO2 cement generated annually? Yes.

Might Seratech's process absorb CO2 allowing any industries to decarbonise? Yes.