The European Union is examining possible modifications to the Carbon Border Adjustment Mechanism (CBAM) to support exporters impacted by the new regulations. Sectors like steel and aluminum, which are carbon-intensive, face challenges due to the additional costs imposed by CBAM.
CBAM, set to be gradually implemented starting in 2023, aims to prevent “carbon leakage” by applying a carbon cost to imports from countries with less stringent climate standards. However, concerns have been raised that the mechanism could harm the competitiveness of European exporters in international markets.
The European Commission acknowledges these concerns and is exploring options to mitigate the impact on European industry. Gerasimos Thomas, Director-General for Taxation and Customs at the European Commission, indicated that CBAM’s revision could include support measures for exporters, intended to ensure that European products remain competitive globally.
EU exporters warn that as carbon costs rise, their products become more expensive, which could reduce their market share against international competitors. Maintaining the competitiveness of European industry during the transition to a green economy is critical for achieving climate goals without sacrificing jobs and economic growth.
Previous attempts to introduce compensation mechanisms for exporters were rejected over concerns about compliance with World Trade Organization (WTO) rules. CBAM has already drawn criticism from EU trade partners like Brazil and China, who view it as a potential trade barrier.
Additionally, the EU closely monitoring developments in the United States, where discussions are ongoing about implementing a similar mechanism. Both Democrats and Republicans have recently proposed initiatives in this area.
As the end of 2025 approaches, the EU plans to assess measures adopted by other countries, including the U.S., to determine whether they can be considered equivalent to CBAM regarding climate impact. European officials emphasize that they will not allow regulatory circumvention but are open to encouraging and rewarding countries that take concrete steps to reduce emissions in carbon-intensive sectors.
Adapting CBAM to support European exporters represents an important step in ensuring a fair transition to a sustainable economy while maintaining the EU’s competitive position in the global trade arena.