W.For a long time, the European Commission, states and industry have struggled to find out how energy-intensive industries such as cement manufacturers or steelmakers can remain competitive despite the ambitious EU climate targets. Now there is a solution. The industry can count on free CO2 rights until at least 2035. This emerges from a draft of the commission for the planned CO2 limit levy, which is available to the FAZ. The solution envisaged is to gradually introduce the border tax from 2025 over a period of ten years and to reduce the free rights initially to 50 percent by 2030 and to zero by 2035 at the earliest.
The border tax or CBAM (English for CO2 border adjustment mechanism) is part of the “Fit for 55” climate package that the Commission intends to present on July 14th. The package aims to ensure that the EU cuts emissions by 55 percent by 2030 compared to 1990 levels, as planned. The Commission originally wanted to rely entirely on the border tax in order to protect European manufacturers from climate dumping by manufacturers from third countries on the internal market. The free allocation of CO2 rights in emissions trading, with which the EU has so far better placed industry in international competition, should expire immediately.
Counter-proposal from Economic Commissioner Gentiloni
On the other hand, there had been resistance above all from the steel industry, which so far has received almost all CO2 rights free of charge. She had argued that the border tax would not protect her when it was competing on the world market with manufacturers from other countries. To do this, the EU would have had to combine the levy with export aid. In the Commission’s view, however, this is in no way compatible with the rules of the World Trade Organization. Economics minister Peter Altmaier (CDU) therefore advertised during a visit to the commission at the end of last week that the free CO2 rights should be adhered to.
The tax is to be introduced in 2023 and initially only apply to steel, aluminum, cement, fertilizers and electricity. However, it should be checked later whether an expansion makes sense. The income is to be used to repay the debts from the Corona development fund. The final decision on the length of the transition phase, in which the border tax will be introduced and the free CO2 rights expire, should be made shortly before the climate package is presented.
There is a counter-proposal from Economic Commissioner Paolo Gentiloni, which provides for a transition phase from 2023 to 2030. It is also available to the FAZ. However, within the Commission, this is not given any great prospect of success, also because the free allocation of emission rights is fixed until 2025. As can be seen from this draft, the EU can expect revenue of 3 billion euros a year from the border tax when it comes into full force. In addition, there would be around 12 billion euros, because the CO2 rights would then no longer be free, but would be auctioned off.