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2024-10-27
The European Union (EU) has introduced strict regulations that will impact imports and exports, especially for goods with high carbon emissions and links to deforestation. This will affect countless online businesses, including those using platforms like Shopify, who want to sell products to the EU after 2026. With two major regulatory measures, CBAM (Carbon Border Adjustment Mechanism) and EUDR (EU Deforestation Regulation), now in effect or set to be implemented, businesses will need to navigate these new standards to continue their operations.
If your business exports to the EU, these rules could have a substantial impact on your ability to trade within this profitable market. So, what does this mean for your online store after 2026? Let’s break down the major aspects of these new regulations, what you need to know, and how you can adapt.
The Carbon Border Adjustment Mechanism (CBAM) is a regulatory measure to reduce carbon emissions from imports into the EU. The mechanism targets high-emission products like cement, steel, aluminum, fertilizer, electricity, and hydrogen, aiming to equalize the carbon costs of imported goods with those produced within the EU.
How Does CBAM Work?
Introduced on October 1, 2023, CBAM currently requires EU importers to report CO2 emissions associated with their products on a quarterly basis. However, beginning in January 2026, importers will need to purchase CBAM certificates that act as carbon credits to offset emissions associated with these products. The certificate price will reflect the average carbon emission cost within the EU, ensuring that products entering the EU bear a comparable carbon cost to domestically-produced goods.
The EU Deforestation Regulation (EUDR) aims to address environmental and biodiversity concerns by limiting imports of products linked to deforestation. It will take effect on December 30, 2024, requiring exporters to demonstrate that their products are free from deforestation or forest degradation.
Which Products Does EUDR Affect?
EUDR applies to products like cattle, cocoa, wood, coffee, palm oil, rubber, and soy, as well as goods made from these raw materials, such as leather, chocolate, and paper. To comply with EUDR, exporters must provide documentation proving that these goods have not contributed to deforestation after December 31, 2020. This means businesses will need to ensure transparency and traceability throughout their supply chains.
No, companies that do not comply with CBAM and EUDR requirements will face barriers to accessing the EU market. Ignoring these regulations could result in fines, customs delays, or even a complete ban from selling within the EU. Compliance with these regulations will be crucial for online businesses, including those on platforms like Shopify, to maintain access to EU customers.
CBAM and EUDR regulations affect businesses that import products into the EU from non-EU countries. Even businesses outside of the EU, like many online stores, must ensure their suppliers meet these requirements to continue selling products to EU customers.
The first step to compliance is to assess the carbon footprint of the products you import or produce. For products impacted by CBAM, EU importers will need to understand and document the CO2 emissions associated with production. This may involve changes in supply chain management and adjustments to reduce emissions.
For products affected by EUDR, businesses must provide proof that production has not led to deforestation since 2020. You will need to collaborate with suppliers to ensure they follow sustainable practices and can provide traceability documentation for your products.
Both CBAM and EUDR impose rigorous reporting standards. CBAM certificates will be mandatory for certain products, while EUDR will require detailed documentation on the origin and supply chain of goods. Establishing systems to collect and report this data to EU authorities will be essential for maintaining market access.
Shopify offers various features and third-party apps that can help you adapt to these new regulations. Some apps allow businesses to monitor and track sustainability in their supply chains. By leveraging Shopify’s integration options, you can more easily collect and report the data required by EU authorities for both CBAM and EUDR compliance.
Failure to comply with CBAM and EUDR could lead to costly fines and penalties, customs delays, and possible exclusion from the EU market. Non-compliance can also harm your brand, as EU consumers increasingly value sustainable products.
While compliance can increase costs, customers may be willing to pay a premium for products they know are sustainably sourced. With sustainability growing in importance, investing in compliance can actually be beneficial for customer loyalty and brand image.
Waiting until 2026 or even 2024 to begin preparations may be too late. The EU regulations will impact all businesses aiming to sell to EU member states, and it takes time to make the necessary adjustments to supply chains and documentation processes.
The EU’s CBAM and EUDR regulations represent the future of sustainable trade with Europe. Adapting your online store to comply with these requirements will ensure that you remain competitive and attractive within the EU market beyond 2026. Whether you’re running a small Shopify store or a larger e-commerce platform, these new rules will be crucial to your ability to grow and thrive in an increasingly climate-conscious market.