EU: Carbon Tax Extended To Protect Metals Industry

Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)

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Summary

The European Commission (EC) has announced a raft of changes to its Carbon Cross-Border Adjustment Mechanism (CBAM), the main tool being used to protect its ailing steel and aluminum industries. However, key industrial groups have said that the changes do not go far enough.

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Europe has strengthened the protections for its struggling steel and aluminum industries by overhauling its Carbon Cross-Border Adjustment Mechanism (CBAM), the world's first carbon emissions tax on imports of heavy industrial goods.

What is CBAM?

Designed to prevent "carbon leakage" CBAM was introduced in 2023 to add a price to imported goods, like steel, based on carbon emitted during production in an effort to solve the long-standing problem of European suppliers being undercut by cheaper goods that come from countries with less stringent environmental rules. The most affected countries will be China, India, Turkey and some other Asian players, including South Korea. CBAM has been heavily criticized by Europe's heavy industries as not doing enough to stop "greenwashing," where metals from non-EU suppliers are presented as low-carbon while still relying on high-emission energy sources. The two-year transition period for CBAM is now over and from January 1 2026, importers will have to start paying the tax. CBAM covers cement, iron & steel, aluminum, fertilizers, electricity, and hydrogen. In the future it will be expanded to include chemicals and polymers (plastics), petroleum products, glass and ceramics.

The Key Changes 

The new changes are designed to close loopholes to prevent circumvention of CBAM, many made in response to feedback received from industry. The EC has expanded CBAM's scope to include 180 downstream products that use a high proportion of iron, steel and aluminum in their production. These include machinery, pipes, radiators, hollow sections, structural steel, screws and bolts, alongside key household appliances like washing machines and fridges. The commission is also proposing measures to close loopholes to prevent circumvention. A temporary support scheme is being introduced to protect EU producers vulnerable to carbon leakage, rewarding cleaner companies globally and "fostering a fair, competitive environment." It will also promote scrap usage to cut emissions in energy-intensive products, incorporating pre-consumer aluminum and steel scrap in CBAM calculations.

The EC's Take 

Stéphane Séjourné, EC executive vice president for prosperity and industrial strategy, said: "European industrial producers should be encouraged -- and not deterred -- in their decarbonization efforts. This CBAM reform brings crucial and long-awaited measures to ensure a level playing field between EU and non-EU industrial producers. By strengthening CBAM, we support our industry's decarbonization, and secure European players' competitiveness on the world stage. Today, the European Commission delivers on its commitments towards Europe's strategic industrial sectors."

Industry Reaction

The European Steel Association (EUROFER) welcomed the changes, but said they are not sufficient to save Europe's steel sector. It said that the proposals "correctly identify several loopholes that risk undermining its effectiveness, notably regarding EU exports, downstream sectors and circumvention practices." However, it claimed the measures put forward are not comprehensive enough to stop continued carbon and jobs leakage. "They do not yet provide the level of protection against carbon and jobs leakage European steel urgently needs to successfully transition while remaining competitive on global markets," said Axel Eggert, director general of EUROFER. "If the EU wants to lead by example and match its climate ambition with a credible industrial policy, CBAM must be made rock-solid and watertight -- and this, from day one." 

European Aluminium, representing 600 plants across 30 European countries, said the changes are no more than a first step and that serious flaws remain. It welcomed the addition of certain downstream products, including certain automotive components as well as wires and cables. However, it called for post-consumer scrap to be included under CBAM as well as more changes specific to the aluminum sector. Paul Voss, director general of European Aluminium, said: "We appreciate the spirit behind this proposal, but spirit alone won't be enough to give our industry the fair conditions it needs and deserves. All we can say at this stage is that it's a meaningful first step. We will work tirelessly with the co-legislators and the Commission to make sure that by the time this draft is final, it does what it is supposed to do, not only in theory but in practice."

Key Takeaways

• The European Commission (EC) has announced a raft of changes to its Carbon Cross-Border Adjustment Mechanism (CBAM), the main tool being used to protect its ailing steel and aluminum industries. 
• 180 downstream goods from screws and bolts to fridges and washing machines will now be covered.
• Industry groups welcomed the changes but agreed that they are not enough. 

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