EU considers exempting most companies from carbon border levy

BRUSSELS: The European Commission may consider scaling back its carbon border levy to just 20 per cent of the companies covered by the scheme, because they account for nearly all of the emissions involved, the EU’s head of climate policy said on Thursday.

The move, part of attempts to lighten the regulatory burden on businesses in the 27-member bloc, could exempt tens of thousands of companies from the world-first carbon border fee. From 2026, the policy known as CBAM will impose costs at the EU border on the CO2 emissions embedded in imported steel, aluminium, cement and other goods.

EU Climate Commissioner Wopke Hoekstra said the Commission’s analysis had found that nearly all of the emissions covered by the carbon border tariff -- 97 per cent -- are produced by just 20 per cent of the companies under the scheme.

“So would it then not be smart to leave that roughly 80 per cent off the hook, in terms of the administrative work burden? In my view, it would,” he told a European Parliament committee meeting.

“Our current thinking, where you actually apply a huge burden on companies who would then fill out a lot of paperwork, have a lot of things to do, without any merit -- that cannot be the solution,” Hoekstra said.

The EU’s simplification drive aims to make local industries more competitive, as Brussels seeks to respond to US President Donald Trump's promise to scrap regulation. Commission President Ursula von der Leyen has vowed that the simplification proposals will not weaken Europe’s climate commitments.

Under the current rules, in Germany alone, 20,000 companies that import eligible goods will have to pay the carbon fee, according to industry estimates. European importers are expected to pass on the CO2 cost to suppliers around the world. The policy has met strong criticism from trade partners including China, South Africa and Brazil, who say the measure penalises developing economies.

Brussels is drafting proposals, due this month, to simplify sustainability policies that some industries have complained are too complex and burdensome. EU officials told Reuters CBAM may be added to this package.

Asked about Hoekstra’s remarks during a press briefing, a Commission spokesperson declined to comment on upcoming proposals. The EU conceived CBAM to subject imported goods to the same carbon price paid by European industries. Some industry groups have warned, however, their firms are struggling to access the data needed for CBAM from international suppliers. Brussels insists the levy is a tool to ensure a level playing field and keep European companies from dodging EU climate policies by moving overseas.