European producers anxiously await CBAM details in ‘Fit For 55’ plan

European industrial producers are anxiously awaiting the details of the European Commission’s Carbon Border Adjustment Mechanism (CBAM), part of the “Fit For 55” climate-change package of measures being presented today, which could greatly influence their energy costs.

Whether the introduction of the CBAM system – designed to introduce transboundary taxes on non-EU countries regarded as making a lesser effort, than the EU, to combat climate change – will be combined with a continuation of free carbon emission rights for certain industrial categories, or spell their end, is a crucial detail for producers active in sectors such as aluminium, cement and steel.

The latter scenario would prompt a sharp increase in energy costs for many energy-intensive producers, and could lead to further closures of industrial plants in Europe.

Latest reports suggest free carbon rights for selected industrial categories, as a cost-offsetting measure, will be maintained until at least 2025 or 2026.

The termination of the carbon cost-offsetting measure would require EU industrial producers to cover emission right costs for their entire production, in other words, sales within the EU and exports beyond, a dreaded prospect that would devastate European industry exports.

In the aluminium sector, for example, the termination of carbon emission cost offsetting measures would result in a 60 percent increase for every ton produced, making business beyond the EU impossible.