Several major European Union countries are in favour of extending the carbon taxation at the borders in the coming years to aid pay back more than EUR 300 billion of debt incurred in the pandemic period - informs Politico.eu
France, Italy and Poland are at the forefront of this initiative. They argue that the EU desperately needs fresh sources of income and that the CO2 taxation at the borders (CBAM) – which will apply in 2026 in certain sectors – is 1 solution.
The taxation will initially cover high-emission sectors specified as steel, cement, aluminium, electricity and hydrogen, ensuring that imported goods are subject to carbon costs at a level consistent with EU standards. This mechanism, known as the Carbon Border Adjustment mechanics (CBAM), provides for a review in 2025, which could lead to an extension of the taxation to another sectors and products.
Poland, 1 of the main advocates of this plan, plays a key function in the EU political debate. By July, he holds a rotating Presidency in the EU and its Commissioner, Piotr Serafin, will oversee the budget portfolio for the next 5 years. The expansion of CBAM will not full cover EU debt commitments ranging from EUR 25 to EUR 30 billion per year, but supporters say it is simply a good start.
“We must find fresh sources of income for the EU,” said Paweł Karbowicz, Deputy Minister of Finance of Poland. “Of all the proposals, CBAM seems most promising.”
Austria, Bulgaria, Italy and Poland re-entered the CBAM subject in December 2024, calling for its extension. There are 3 ways to make the mechanism:
- Covering fresh economical sectors,
- Export and import extensions,
- Taking into account the alleged “downstream products”, i.e. products derived from natural materials already covered by CBAM.
In a paper submitted to the European Commission, these countries called for the extension of CBAM to downstream products by the end of the transitional period, i.e. by the end of 2025.
France besides supports these changes. Companies affected by CBAM are afraid that the deficiency of coverage of downstream may let abroad companies to circumvent fees. However, not all EU countries are convinced of this idea. Countries with a more free marketplace approach fear that Donald Trump's administration can respond with rhetoric. Although the taxation covers importers in the EU and not straight abroad companies, it can lead to trade tensions, peculiarly in the context of the expanding hazard of the US-EU customs war.
“I don’t know if this has a chance to go through”, said an anonymous authoritative from a country opposed to the CBAM extension. “The question is: what will Trump do?”
Coal taxation at the borders is 1 of the fewer mechanisms providing direct influence to the EU budget, and the request for fresh sources of backing is urgent.
Failure to address this issue can have serious consequences, leading to cuts in key funds specified as agricultural subsidies or defence funding. The European Commission estimates that 75% of the estimated gross from CBAM, or around EUR 1.5 billion, will go to the EU budget and the remainder to national budgets.
Unlike another sources of income, specified as the global corp taxation or the EU Emissions Trading strategy (ETS), CBAM is simply a unique chance to increase EU gross without associate States having to transfer funds.
“If individual in Brussels thinks that gross can be transferred from the ETS to the EU budget, this is not a fresh origin of money,” said Karbowicz. – “It’s spinning around, which makes no sense.”
This could be addressed at the next EU summit in March, during which leaders will discuss the future Community budget. The European Commission will present its budget draft in July.
