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.