The Carbon Impact of Component Production in China: Investigating the Impact of Carbon Border Adjustment Policies for a Global Manufacturing Company

Sammanfattning: Title: The Carbon Impact of Component Production in China: Investigating the Impact of Carbon Border Adjustment Policies for a Global Manufacturing Company Authors: Fabian Bergman & Spiros Pavlidis Supervisor: Eva Berg, Lecturer at Engineering Logistics, Faculty of Engineering (LTH) at Lund University Examiner: Louise Bildsten, Associate Lecturer at Engineering Logistics, Faculty of Engineering (LTH) at Lund University Contribution: This thesis has been a complete elaboration between the two authors. Each author has been involved in every part of the process and contributed equally. Background: The thesis aimed to research the impact of the Carbon Border Adjustment Mechanism (CBAM) on Atlas Copco Industrial Technique’s (ACIT) supply chain of components sourced from China. In addition, the aim was also to find accurate embedded emission data from the component manufacturing. ACIT is a multinational industrial company that provides industrial power tools and assembly solutions to various industries. The CBAM is a new legislation set to be implemented in 2023, obligating European companies within covered industrial sectors to pay for their emissions in third countries. By investigating this, the goal was to deliver a factual basis for strategic supply chain decisions based on the finding of the thesis. Methodology: Holistic single case study. Purpose and Research questions: This study aims to estimate embedded emissions in steel and aluminum components sourced from China and examine the impact of the CBAM on ACIT’s upstream supply chain. 1. What is the weight of raw materials acquired by ACIT through component sourcing from China? 2. What are the embedded emissions of ACIT’s sourced components from China? 3. Is ACIT in the scope of the CBAM, and what would be the impact of the legislation on the upstream supply chain? Findings: ACIT is not in the scope of CBAM and is not directly impacted by the legislation. If ACIT were to become part of the scope in the future, the monetary impact is deemed negligible and would not trigger any supply chain re-configurations as it stands. However, if the monetary impact would increase severely, ACIT needs to decide whether they should stay with the same suppliers and develop their manufacturing process into a less carbon-intensive process, or change to suppliers with less embedded emissions in their components. The author’s recommendation in this case is to analyze which of the current suppliers is performing best in terms of carbon emissions and focus on extending the partnership with these suppliers. Thus, reducing the risk of new partnership creation in the supply chain, and minimizing the risk of disrupting the supply chain. Keywords: Carbon Border Adjustment Mechanism, CBAM, EU ETS, Embedded emissions, Steel and aluminum manufacturing in China, Sourcing.