Europe to Impose Tariffs on Carbon-Intensive Steel and Aluminum

Global metal manufacturing is already set to change in 2023. Indeed, the European Council and European Parliament recently reached a provisional agreement over the Carbon Border Adjustment Mechanism (CBAM). This would impose new tariffs on materials from carbon-intensive industries imported into the 27-member bloc.

According to members of the Committee on the Environment, Public Health, and Food Safety (ENVI), the CBAM will include steel and aluminum as well as hydrogen imports. In a December 13 news conference, CBAM rapporteur Mohammed Chahim said, “If you want to sell your products, then you have to pay at the border.”

Implementation of the agreement would tentatively begin on October 1, 2023. After a monitoring period, the program would ramp up to full implementation over the following three years. Chahim added that European metal manufacturing companies must “Fulfill the same conditions” on carbon emissions.

According to the Financial Times, a final set of talks on the provisional plan was due to conclude over the weekend. After that, CBAM will require approval from the member states and the European Parliament, headquartered in Strasbourg.

“The phasing out of free allowances for CBAM sectors still needs to be agreed in the context of the ongoing EU ETS negotiations,” the council noted. “Further work is also required on measures to prevent carbon leakage on exports.” The council also noted that legislators began negotiating back on the 11^th of July. Clearly, metal manufacturing has been in their sights for some time.

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Concerns About the Impact on Metal Manufacturing

The Financial Times noted that several European trading partners were immensely critical of CBAM. In their opinion, it would not only be protectionist but significantly impact their own economies. One trader told MetalMiner they remained unconcerned about CBAM’s potential impact because the full implementation remains a year away.

Another metal manufacturing industry watcher was supportive. “I think that this is a necessary step for Europe. They need protection whilst undertaking their own carbon-reduction investments,” the analyst said. They added that the initiative would pass along costs and allow imports to undercut them. Finally, they claimed that the project would prompt third-country steel exporters to invest in carbon-reducing equipment rather than paying heavy duties.

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