EU set to reduce Carbon Tax Weight on industrial exporters

The European Commission is preparing to unveil a proposal by the end of 2025 that would shield EU exporters in high-emissions sectors—such as steel, aluminum, and cement—from paying a carbon tax on goods sold abroad. The aim: to prevent “carbon leakage,” where producers shift operations to countries with looser climate rules.

The measure, targeted at sectors covered by the EU’s Carbon Border Adjustment Mechanism (CBAM), would initially be time-limited and subject to review following the implementation of the bloc’s 2026 emissions trading system (ETS) reform. The goal is to ensure that EU-made goods aren’t penalized when competing globally, and to align climate ambitions with industrial competitiveness.

EU Carbon Tax: CBAM Rolls Out With Eye on Export Relief

The export exemption is being advanced as the EU prepares to roll out the CBAM regime starting next year, which will impose tariffs on imports of carbon-intensive goods. The mechanism is designed to discourage companies from relocating production outside the bloc to escape tightening environmental standards.

But as CBAM ramps up, the EU will simultaneously phase out free carbon allowances for domestic producers—raising alarm in industry circles that this will hurt their ability to compete abroad. The Commission’s planned compensation scheme is meant to address those concerns, providing a financial buffer as the old system winds down.

Emissions Cut Target Sparks Industry Pushback

Brussels’ proposal comes as part of a broader climate package, which includes a binding goal to slash greenhouse gas emissions by 90% by 2040 compared to 1990 levels. The target, however, has triggered resistance from several member states—including France—who are demanding stronger support for industry and greater recognition of nuclear energy as a clean power source.

Climate Commissioner Wopke Hoekstra, speaking to the Financial Times, said the EU needed to “double down” on creating business-friendly conditions to meet its climate objectives. The forthcoming measures reflect that balancing act: tightening environmental rules while ensuring Europe’s industrial base remains globally competitive.

source: carbon herald