European industries covered by the EU’s future carbon border adjustment mechanism (CBAM) have expressed doubts about the proposal, tabled last week. In addition to border measures, they are calling for an export rebate scheme to help green EU products compete on global markets.

The European Commission tabled proposals last week to introduce a carbon levy at the EU’s borders in order to protect EU manufacturers from cheaper imports of carbon-intensive goods coming from abroad.

The new scheme “will ensure that our climate ambition is not undermined by foreign firms subject to more lax environmental requirements” while encouraging foreign countries to decarbonise as well, the Commission said.

The levy will apply to six categories of imports: electricity, iron and steel, aluminium, fertilisers, and cement. The system will be phased in as of 2026 for a period of ten years, by which time EU industries covered by the scheme will stop receiving free CO2 permits on the EU carbon market, a move aimed at ensuring the system is compatible with World Trade Organisation rules.

The EU’s proposed carbon border adjustment mechanism – or CBAM – is feared by Australia, and raised “grave concern” among emerging economies such as Brazil and China which see the proposal as protectionist.

But European industries covered by the proposal aren’t fans of it either.“All metals sectors have expressed concerns that the CBAM as designed would disadvantage Europe producers irrespective of their carbon footprint,” said Eurofer, the European steel industry association, following the announcement of the Commission’s proposal.

Industry is worried that the gradual introduction of the levy will coincide with a phase-out of free CO2 permits they receive under the EU’s emissions trading scheme (ETS).

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