(Bloomberg) -- The European Union will leave nothing off the table when it comes to helping the bloc’s exporters deal with the side effects of a landmark carbon border levy, according to a senior official overseeing the measure.
The European Commission will explore options to help domestic industries affected by the Carbon Border Adjustment Mechanism — such as steel and aluminum — in a review brought forward to next year, Director General for Tax Gerassimos Thomas said. It will then put forward proposals in 2026.
The EU is rolling out the CBAM levy in a bid to stop the dirtiest industries from moving abroad to escape a tightening of climate regulations. It will gradually phase in tariffs for imported goods and phase out free carbon allowances for EU emitters. Exporters in the bloc have complained their products will be made more expensive as they begin to pay more for emissions.
Keeping domestic industry competitive during the energy transition is a key priority of President Ursula von der Leyen’s second term, Thomas said in an interview at the COP29 climate conference in Baku, Azerbaijan. “There are several ideas and nothing is out of the question,” he said, adding “we are conscious that we will have to tackle this issue earlier than initially envisaged.”
QuickTake Explainer: How Europe Will Tax C02 Emissions Beyond Its Borders
The bloc’s executive branch will also put forward measures to simplify rules for small and medium-sized companies, lessoning the burden of red tape, he said.
The EU needs CBAM to ensure a level playing field with global rivals in the shift to net zero. Yet its complex design has raised doubts about its implementation, former European Central Bank President Mario Draghi said earlier this year, warning that the bloc may need to rethink the pace of phasing out support.
Previous attempts by legislators to forge a mechanism to help EU exporters have been ditched amid fears they may breach World Trade Organization rules. Trading partners such as Brazil and China have criticized the CBAM, and the EU is concerned about how the new US administration will react to it, Thomas said.
America is under pressure to develop its own CBAM, with both Democrats and Republicans putting forward proposals in recent years. Toward the end of 2025, the EU will lay out what steps in the US — and other nations — could be deemed as having an equivalent climate impact to the bloc’s carbon-trading system.
“We will not allow measures that bypass the regulation,” Thomas said. “But we will have a system that encourages and gives incentives to countries that take measures to make these sectors greener.”
The overall timeline for CBAM, which will start collecting a fee in 2026, remains unchanged.
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