
Largest European political party suggests putting CBAM on hold for at least 2 years
The EU intends to be climate-neutral by 2050. This ambitious objective is at the heart of the European Green Deal and is a legally binding target because of the European Climate Law.
But the bloc’s ambitious climate goals were questioned by the EPP in a joint paper from a leadership summit held in Berlin on January 17-18.
“The EU has decided on ambitious climate targets and policies to achieve them. When implementing them, we must make sure that they do not lead to deindustrialization,” the EPP’s paper said.
The EPP argued that excessive regulation and bureaucracy have become a burden for the European economy and a key reason the EU’s productivity is lagging, falling behind the US and China.
“The gap between the US and the EU in [gross domestic product] widened from 17% in 2002 to 30% in 2023. The main reason for the worsening situation is lower productivity in the EU, which leads to slower income growth and weaker domestic demand in Europe,” the paper said.
To address the issues, the EPP suggested gradually revising the sustainability legislation, putting the EU corporate sustainability reporting rules, as well as the CBAM’s EU carbon tax, on hold for at least two years.
The EU’s CBAM, one of the main decarbonization drivers, is expected to fully come into force in 2026. It is a tool intended by the EU to put a fair price on the carbon emitted during the production of carbon-intensive goods that enter the trading bloc.
But the CBAM’s complexity poses certain challenges for importers and brings additional costs. European steel buyers have expressed concerns about the lack of clarity in its implementation, the potential for circumvention, and the potential for “lost added value” for the European manufacturing industry.
“Steel importers might start avoiding importing goods covered by the CBAM and instead buy items with higher customs classification instead of semi-finished products,” a trading source said.
A source in Germany said, “Small and medium-sized steel importers are concerned with CBAM compliance costs, including supplier communications, software, data verification and so on.”
But steelmaker sources criticized a potential further delay on the CBAM.
“Putting the CBAM on hold would be a disaster,” a producer in Northern Europe said.
A second mill source said, “We talk about protecting the domestic steel sector, but [delaying the CBAM] would be fundamentally wrong, exposing the European market to ‘dirty’ steel and undermining our competitiveness.”
The steel industry is currently responsible for around 5% of CO2 emissions in the EU and 7% globally, according to European Commission data.
Apart from putting CBAM and corporate sustainability reporting rules on hold, EPP suggested limiting the scope of its implementation to larger companies with more than 1,000 employees. Besides, sustainability reporting obligations for large companies should be reduced by at least 50%, according to the report.
Renewable energy needs to become affordable
“If climate policy becomes an obstacle for competitiveness and growth, it will not only fail to have the support of European citizens, but it will also risk increasing global emissions because products will be produced in other regions of the world with higher emissions,” the report said.
The EPP once again underlined the importance of expanding the affordable clean electricity grid in the EU.
“The availability of affordable and dispatchable energy is a crucial precondition for growth and jobs. Today, EU companies face electricity prices that are 2-3 times higher than in the US, while natural gas prices are 4-5 times higher. Therefore, we need to leverage all available energy solutions through a technology-neutral approach that includes renewables, nuclear, hydrogen, bioenergy and carbon capture utilization and storage,” the EPP said.
Affordable electricity is one of the key pain points for the struggling European steel sector, which has also braced for the EU’s ambitious climate targets.
Over 50 million tonnes of new green steelmaking capacity — via electric-arc furnace (EAF) or EAF-DRI (direct-reduced iron) production — is expected to come online in Europe in 2025-2030, according to Fastmarkets estimates.
As a result, sufficient green hydrogen and renewable energy supply to produce green hydrogen at competitive prices is crucial for the European steelmaking decarbonization journey, Fastmarkets understands.
The European steel sector will require an additional 400 TWh of CO2-free electricity by 2050, or about seven times the amount of energy that the sector currently purchases, according to estimates from European steel association Eurofer.