Despite the restrictions imposed by global trade rules, the European Commission has promised to find a permanent solution for exporters of carbon-intensive goods such as steel and fertilizers. Many say that until a solution is found, the CBAM tax, introduced by the EU executive to protect industrial competitiveness, remains an unfinished business.
The EU Carbon Boundary Regulation Mechanism (CBAM) is supposed to ensure the competitiveness of European industry, especially carbon-intensive industries such as steel, aluminum and fertilizers.
From January 1, 2026, companies importing these products had to pay an additional tariff corresponding to the carbon price for similar products in the EU in order to avoid unfair competition from jurisdictions with more lenient climate policies.
However, some, including leading MEPs, say that the CBAM's work is only half done because the tax does not benefit EU producers who export the same goods.
The proposed solution to this problem should be found within a few weeks, but it will have to contend with entrenched industry interests, complex global trade rules, and the parallel — and highly controversial — reform of the carbon market of the EU Emissions Trading System (ETS).
The missing element
Until the CBAM is fully implemented, the Commission provides European producers with free carbon emissions quotas to offset the cost impact of the ETS. According to the current rules, they will receive fewer and fewer free permits, and from 2034 they will not receive them at all.
Industries that export products subject to CBAM outside the EU will also lose benefits. They are forced to pay for ETS expenses without using any CBAM-style protection in their foreign markets, which, they say, leads to a decrease in competitiveness.
Without a mechanism to help these exporters, "there is a real risk that production and emissions will shift outside Europe rather than be reduced globally," said Axel Eggert, director general of the Eurofer steel lobby.
Some say that until this is done, the border carbon tax will remain a work in progress.
"The CBAM mechanism should have two pillars: one pillar ensuring a "level playing field" in the domestic market, and one pillar ensuring this for exports," said the MEP. Pascal Canfin told Contexte about this at the end of March. He is a negotiator for the Renew group on current legislative plans.
