The EU executive wants to grant itself the power to exempt goods from the just-launched carbon border adjustment mechanism (CBAM), which requires importers of certain products to pay for planet-warming pollution emitted during the production process.
This levy is designed to protect European manufacturers — which are obliged by EU law to pay for each ton of CO2 they emit — from being out-competed by cheaper, dirtier imports. Importers of Chinese steel, for example, now pay the difference between Beijing’s carbon price and the bloc’s, ensuring it bears the same pollution costs as made-in-EU steel.
The prospect of having that protection yanked away by the Commission has spooked European manufacturers — particularly after a dozen EU governments immediately started campaigning to apply the exemption to fertilizers in an effort to protect farmers from higher import costs.
CBAM “is linked to investment, but it’s also linked to survival, actually, of some members,” said Antoine Hoxha, director of industry association Fertilizers Europe. “We can compete with anyone on a level playing field. But we need that level playing field.”
Fertilizer producers aren’t the only ones worried. Most major industry bodies representing CBAM-covered sectors in Brussels — which, aside from fertilizers, include steel, iron, aluminum, cement, hydrogen and electricity — told POLITICO they and their members had concerns about the Commission’s plans.
They warn that the new exemption clause, besides opening EU companies to unfair competition, risks undermining CBAM’s other goal of encouraging the bloc’s trading partners to switch to cleaner production methods, as it creates uncertainty over the level of EU demand for low-carbon imports.