Largest EU Parliament Party: CBAM ‘Should’ Be on Hold for 2 Years
The leaders of the European People’s Party (EPP), the party with the most representatives in the European Union Parliament—the EU’s legislative body—with 188 out of a total 720 seats, said the carbon border tariff that importers are expected to start paying next year “should be put on hold for at least two years.”
Following the EPP’s leaders’ retreat in Berlin over the weekend under EPP President Manfred Weber, the party published a three-page brief criticizing regulatory burdens and obligations for companies in Europe that are stymying economic growth and investment.
“We advocate cutting back bureaucracy and regulation substantially… we need to go further and be even more bold because excessive regulation and bureaucracy has today become a key reason for the EU’s productivity falling further behind the US and China,” the party wrote.
The centre right party—of which EU Commission President Ursula von der Leyen is a member—said a two-year pause should also look at reviewing the scope of the carbon border adjustment mechanism (CBAM) and other laws.
This would be to “limit the scope of these laws to the largest companies with more than 1,000 employees, eliminate the direct effect to [small and medium-sized enterprises], align legislative overlaps … and significantly reduce the reporting obligations for large companies by at least 50%”, the EPP leaders wrote.
The CBAM went into effect in October 2023, requiring EU importers to file quarterly and eventually annual reports detailing the embedded emissions in their products.
The CBAM will initially apply to six sectors—steel, cement, iron, fertilizers, hydrogen and electricity—but the EU could announce an increase to that scope this year in order to include more sectors by 2030.
EU importers are scheduled to start paying for these embedded emissions based on the weekly average auction price of EU carbon allowances (EUAs) starting in 2026 as the CBAM cost is phased in gradually until fully implemented in 2034.
“The CBAM has to be scrutinized as well regarding its effects on red tape and the competitiveness of the different sectors of our economy,” the EPP said. The EPP said the two-year pause should also apply to the implementation of corporate sustainability regulation such as the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence
Directive (CSDDD).
An EPP representative told OPIS on Tuesday that the two year pause on the CBAM and other legislation is now part of the party’s official stance according to the party leaders following their weekend retreat.
“[The] EPP Group’s position on CBAM is unchanged. The EPP Group supports CBAM but the implementation and paperwork has proven to be too burdensome, including the paperwork to prove the carbon content. Therefore, we need time to fix it,” the representative said.
‘Certainty’ Needed for Businesses and Trump Trade War Looms
Gabriel Rozenberg, chief executive officer of CBAMBOO, a software company aimed at CBAM compliance, told OPIS on Tuesday that European businesses deserve certainty, especially as there has been a ramping up phase for the CBAM since late 2023.
Policymakers should be careful when pushing for simplifications that do not undermine the credibility of the future tax requirement, Rozenberg said, otherwise companies “could get whipsawed” by a major new charge they failed to anticipate.
“There is obvious room for improvement and simplification in the way that the CBAM operates on companies. At the same time, businesses right now have less than a year to prepare for the introduction of a major new tax,” Rozenberg said.
Faten Aggad, executive director of the African Future Policies Hub, wrote in a social media post Monday evening that the EPP could potentially block the ongoing legislative review as the CBAM transitions towards full entry next year.
“That process is ongoing and the [EU] Commission is expected to submit a legislative proposal to the [EU] Parliament detailing proposals on scope expansion, measures for developing countries, etc.,” Aggad wrote. “That legislative proposal risks being blocked by the EPP and their allies (from right to center). This would make it a majority opposition.”
Aggad noted that with President Donald Trump now in power in the United States, the EU might want to avoid a trade war, especially if the American president decides to place a steel tariff on EU goods.
“A new Trump tariff would be felt more strongly this time around… a postponement may be the least worst option considering circumstances,” Aggad said.
In his first day in office, Trump signed an executive order pulling the US out of the Paris climate agreement, to which nearly 200 countries signed back in 2015 to keep global warming levels below 2 degrees Celsius above pre-industrial levels. Trump also pulled out of the agreement in 2017 in his first term and former President Joe Biden re-inserted the US into the pact in early 2021.
Earmarking Larger EU ETS Revenues for Hard-to-Abate Industry
The EU Emissions Trading System (EU ETS) or carbon scheme is also in the EPP’s crosshairs.
The EPP leaders wrote that a “larger share of ETS revenues should be earmarked to energy intensive industries, for example for supporting green hydrogen or carbon capture and storage solutions.”
Energy intensive industries include the cement, steel, iron sectors among others that are the highest carbon emitters in the EU ETS. While these industries receive free EUAs on an annual basis depending on their current activity levels, the EPP appears to be calling for additional funds from EU ETS
revenues to be allocated towards these industries.
The EU ETS is a market-based mechanism that charges polluters a variable carbon price with the incentive to decarbonize in order to buy less EUAs.
As of Monday, OPIS assessed the benchmark December 2025 EUAs futures contract at €79.50/mt ($82.29), its highest level in months.
“The EU has decided on ambitious climate targets and policies to achieve them. When implementing them, we must make sure that they do not lead to deindustrialization. If climate policy becomes an obstacle for competitiveness and growth, it will not only fail to have the support of European citizens, but it will also risk increasing global emissions because products will be produced in other regions of the world with higher emissions,” the EPP leaders wrote.
Reporting by Humberto J. Rocha, hrocha@opisnet.com
Editing by Yazdi Merchant, ymerchant@opisnet.com
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