Russian steelmakers seek EU carbon tax impact mitigation

The Russian Steel Association says the Carbon Border Adjustment Mechanism (CBAM) that the EU plans to implement in 2026 entails significant risks for the global economy and ferrous metallurgy in particular, Kallanish notes.

“The inclusion of the steel sector in the scope of the EU border carbon regulation may have a significant negative impact on the development of the industry,” Russian Steel claims. “The current project of the European Commission (EC) is selectively approaching the selection of goods within the sectors included in the scope of the new collection, including metallurgy. We believe that this approach does not pass the test for compliance with the declared climate goals of the EU and can lead to a significant market imbalance.”

The extent of the impact of the tax on Russian exporters remains unclear. The EC must develop by-laws to regulate carbon footprint calculation, says the association, which represents major Russian steelmakers like NLMK, Evraz, Mechel, MMK, TMK, Severstal, IMH, OMK and Metalloinvest.

“Until this information is received, no industry will be able to assess all the potential effects of EU border carbon regulation,” Russian Steel observes. “However, it is already obvious that calculations using a complex European methodology and mandatory external verification of emissions can become a serious administrative barrier for supplies to the EU.”

The association therefore believes that after the measures are imposed, EU trading partners will initiate a WTO dispute resolution procedure in order to force deregulation. “It should be borne in mind that, firstly, the procedure for resolving disputes at the WTO usually takes more than two years, but today the Appellate Body does not work,” Russian Steel says. “Secondly, the ultimate goal of the WTO dispute resolution procedure is to eliminate the violation … [while] winning in a dispute does not create the right to claim compensation for losses incurred by the business.”

Even if the carbon tax is revoked following the dispute, suppliers to the EU would suffer irreparable losses and, most importantly, irreversibly lose their position in a highly competitive market, the association adds.

Russian Steel concludes that it would be prudent for Russian government representatives to promptly begin negotiations to protect the interests of domestic exporters, including ferrous metallurgy products, from the EU carbon tax impact.

Svetoslav Abrossimov Bulgaria