EU proposed carbon tariff sparks mixed reaction from industry

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SFROM THE EU launched its emissions trading system in 2005, industries have followed divergent trajectories in terms of greenhouse gases. The electricity sector has cut them in half. Among cement and steelmakers, who have obtained free quotas for four-fifths of their exhaust to stop the shift of production abroad, they have barely budged.

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The European Commission wants to put an end to this document. Last month the EUThe executive branch of the has proposed new rules to help the bloc meet its goal of reducing emissions by 55% from 1990 levels by 2030. A proposal would remove free allowances for aluminum producers, cement, fertilizer, iron and steel, and would levy import tariffs on these products based on their carbon content. This “carbon border adjustment mechanism” (CBAM) aims to level the playing field. EU.

the EU the plan is just that for now. It needs the green light from the European Parliament and the Member States. China says it is violating World Trade Organization rules; others may dispute it. If adopted, CBAM would not start until 2026 and would take a decade to roll out. Yet this is a test case that governments and businesses elsewhere will study.

HERE, a research firm, predicts that by 2030 CBAM-companies covered will receive 145 million tonnes of annual allowances less than they would have. This represents around 12 billion euros ($ 14.2 billion) per year, or 2% of the sales of the new sectors covered, according to the commission’s forecasts. Four-fifths of the burden will fall on steel and cement.

Heavy industry can pass on the costs of CBAM To EU companies that use carbon-intensive inputs. The committee considers this impact to be modest, with a slight drop in employment. Not everyone agrees. Farmers and unions are furious. Pekka Pesonen, head of Copa Cogeca, a farmers’ lobby, says fertilizers account for around 35% of the cost of crops such as wheat. the CBAM would thus make it more difficult to compete with cheaper foreign grains. And the costs will be difficult to pass on, as consumers are reluctant to pay more for low-carbon products, says Pesonen.

Business reaction has been mixed. Many profess to support the energy transition but complain about the rules. Others, including LafargeHolcim, the Swiss cement giant, say they welcome them. However, Cédric de Meeûs of LafargeHolcim notes that although cement manufacturers no longer pay for all their pollution, the rise in the price of carbon in Europe makes EU-makes cement more expensive than foreign stuff. As a result, the block imported 25% more cement in 2020 than in 2019.

Some business groups are responding by putting pressure on lawmakers. With some success: in March, the European Parliament passed a non-binding vote to maintain free benefits. Others will cover themselves by buying additional allowances when carbon prices are low, as power companies now do.

Some react as the plan envisaged: by trying to decarbonise themselves. In May, Germany’s Thyssenkrupp joined forces with the port of Rotterdam to import renewable hydrogen to make green steel. Bloomberg’s Antoine Vagneur-JonesNAVE, a research firm, identifies 24 small-scale hydrogen projects in the CBAMeducation sectors.

Decarbonization is expensive. Mr. de Meeûs says that making cement with a third less carbon adds about 15% to the cost. ArcelorMittal, the world’s largest steelmaker and one of Europe’s biggest emitters, plans to invest an additional $ 10 billion to reduce carbon emissions by 2030. This could increase its capital spending by a third. But the company also expects governments to contribute a similar amount. His boss, Aditya Mittal, recently noted that renewable energy companies have the backing of politicians. Other leaders are asking for infrastructure, such as pipelines to channel the carbon dioxide captured in factories, as well as financial assistance. the EU may need more carrots to accompany his new stick. â– 

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This article appeared in the Business section of the print edition under the title “Un terrain vert et plat”


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