CBAM and RED III Industrial Competitiveness in the EU
See how CBAM and RED III industrial competitiveness rules reshape emissions reporting, renewable inputs, and procurement decisions across EU industry.
New research from Cuadernos Orkestra shows that two major EU policy tracks are converging around industrial procurement. For teams evaluating CBAM and RED III industrial competitiveness, the central issue is no longer simply whether decarbonization will affect costs. It is how quickly carbon reporting, renewable-energy requirements, and low-carbon material choices will change the basis of competition.
The study focuses on the Basque and wider European industrial sectors, including emissions-intensive activities such as steelmaking and foundries. Its findings are also relevant to biochar and metcoal suppliers because industrial buyers increasingly need carbon inputs that combine technical performance with credible emissions data.
CBAM and RED III Industrial Competitiveness: Why the Rules Converge
CBAM and RED III address different parts of the industrial decarbonization challenge. The Carbon Border Adjustment Mechanism places a carbon cost on certain imported goods, while the revised Renewable Energy Directive raises expectations for renewable energy and fuels used within the EU economy.
A key RED III figure is the EU's binding target for renewables to reach 42.5% of energy consumption by 2030, supported by an indicative ambition of 45%. That target accelerates pressure on industrial companies to move away from fossil-based energy and feedstocks.
| Policy | Main mechanism | Industrial effect | Core procurement question |
|---|---|---|---|
| CBAM | Carbon cost for certain imported goods | Makes embedded emissions more commercially relevant | Can the supplier provide accurate emissions data? |
| RED III | Higher renewable-energy requirements | Encourages electrification and renewable fuels or materials | Does the input support the buyer's energy transition? |
| Combined effect | Carbon accounting plus renewable adoption | Changes total cost, investment priorities, and supplier selection | Which option is technically suitable and verifiably lower carbon? |
The study's central finding is that European companies face a dual competitiveness test: they must decarbonize while absorbing additional compliance, energy, reporting, and investment costs. A practical CBAM and RED III industrial competitiveness strategy therefore needs to connect regulatory work with purchasing decisions.
What CBAM Changes for Industrial Procurement
CBAM is intended to reduce carbon leakage, which occurs when production or sourcing shifts to jurisdictions with less stringent climate rules. By attaching a carbon cost to certain imports, the mechanism aims to reduce the cost advantage of products made under weaker carbon constraints.
CBAM's transitional phase ran from October 2023 through 2025. During that period, importers had to report embedded emissions, meaning the greenhouse gases associated with producing the imported goods. Financial obligations for CBAM certificates begin in 2026, making the quality of supplier emissions data more consequential.
For procurement teams, the operational implications include:
- Determining whether purchased products fall within applicable CBAM categories.
- Requesting consistent, auditable embedded-emissions information from suppliers.
- Comparing offers on expected landed cost rather than invoice price alone.
- Aligning purchasing data with finance, sustainability, and customs reporting.
- Identifying data gaps before they affect a shipment or certificate calculation.
The research does not suggest that every carbon input is automatically covered by CBAM. Instead, it shows why inputs used to manufacture CBAM-exposed industrial goods can influence the finished product's emissions profile. Buyers should confirm product classifications and accounting treatment rather than assuming that a low-carbon label guarantees compliance.
RED III Turns Renewable Energy Into a Sourcing Issue
RED III extends the procurement challenge beyond border reporting. The directive calls for an average annual increase of 1.6 percentage points in renewable-energy use across industry between 2021 and 2030.
This creates pressure to electrify industrial processes and adopt renewable fuels or materials where technically and commercially feasible. It can also change how buyers evaluate long-term power contracts, process heat, reducing agents, and carbon-bearing inputs.
For steel and foundry businesses, the distinction between energy and material use is important. A carbon source may help reduce the embedded emissions of production without automatically satisfying a renewable-energy requirement. Procurement teams should therefore assess two separate questions:
- Does the material reduce lifecycle or product-level emissions under the buyer's accepted accounting method?
- Does its use contribute to a relevant RED III renewable-energy or fuel obligation?
That distinction makes verified product documentation essential. Suppliers listed through a [link:biochar-marketplace] should be prepared to explain production energy, feedstock origin, emissions boundaries, and the intended industrial application—not just provide a generic sustainability claim.
Renewable Hydrogen and E-Fuels Reshape Input Markets
RED III also establishes targets for renewable fuels of non-biological origin, commonly called RFNBOs. These include renewable hydrogen and certain e-fuels produced using renewable electricity rather than biological feedstocks.
The targets require RFNBOs to account for 42% of relevant industrial hydrogen and fuel use by 2030, rising to 60% by 2035. According to the research, these requirements make renewable hydrogen and e-fuels strategically important for industrial energy procurement and future input costs.
Biochar is not a substitute for hydrogen in every process. However, the two can form part of the same decarbonization portfolio. An industrial plant may combine renewable electricity, hydrogen, efficiency measures, and lower-carbon carbon materials across different production stages.
Buyers should map where each solution can create value rather than searching for one universal replacement. That means coordinating energy procurement with technical teams responsible for furnaces, charge materials, reductants, and product quality. It also means considering future availability and compliance risk alongside today's price.
The Competitive Opening for Biochar and Metcoal Suppliers
The study finds that suppliers capable of delivering verifiably low-carbon products may gain a competitive advantage as CBAM and RED III requirements tighten. This creates a potential opening for industrial biochar and biocarbon producers serving steel, foundry, and other heat- or carbon-intensive applications.
The opportunity is conditional, however. Biochar must meet the buyer's technical requirements and come with evidence that supports the claimed emissions benefit. Procurement teams can use the following qualification checklist:
- Technical suitability: Confirm carbon content, moisture, ash, sizing, handling, and process compatibility.
- Emissions documentation: Define the calculation method, system boundary, production energy, and logistics assumptions.
- Feedstock traceability: Document biomass origin and relevant chain-of-custody information.
- Supply reliability: Assess volume, delivery frequency, production capacity, and contingency planning.
- Claim boundaries: Clarify whether the material lowers product emissions, supports a renewable target, or does both.
Traditional metcoal suppliers are exposed to the same shift. Competing in EU-facing supply chains may increasingly require more transparent emissions reporting, lower-carbon production, or a portfolio that includes alternative carbon sources. For suppliers, CBAM and RED III industrial competitiveness will depend on evidence as much as product availability.
Build Procurement Strategy Around Verifiable Carbon Performance
Cuadernos Orkestra's analysis shows that CBAM and RED III are reshaping industrial competitiveness from two directions. CBAM increases the commercial importance of embedded emissions, while RED III raises the pace and ambition of renewable-energy adoption.
Industrial buyers should respond by integrating carbon data, technical qualification, regulatory exposure, and total landed cost into supplier evaluation. Biochar producers, meanwhile, have an opportunity to position their products as credible industrial inputs—but only when performance and emissions claims are transparent and verifiable.
The full findings are available in the Cuadernos Orkestra research. To compare lower-carbon carbon materials and connect with potential supply partners, explore verified biochar suppliers on BiocharLink.