EU votes to scrap carbon levy brake

European Union lawmakers voted to eliminate a provision that would have permitted the EU to temporarily exempt goods from its carbon border levy if their prices skyrocketed, potentially sparking a disagreement with member states seeking to maintain the measure. The carbon border levy, part of the EU's Carbon Border Adjustment Mechanism (CBAM), began enforcing CO2 fees on key imports like steel, cement, fertilizers, aluminum, electricity, and hydrogen starting January 1, 2026, ensuring these goods don't enjoy an unfair price edge over domestically produced items subject to EU carbon emissions.

Initially designed as a cornerstone of the EU's climate strategy, the CBAM aims to eventually cover more than half of all emissions from sectors under the EU's carbon market. However, lawmakers now prefer utilizing CBAM revenue to offset industries' increased costs instead of allowing the emergency brake. This position contrasts with EU member states who insist on retaining the right to suspend the levy under certain conditions, such as a price increase of more than 50% within six months.

The European Commission initially proposed the emergency brake last year, following France's call to suspend the fertiliser levy to alleviate costs for farmers. Nonetheless, the proposal has sparked controversy, with companies warning that activating the brake could hinder low-carbon investments and burden domestic industries the levy aims to shield from cheaper imports.

EU countries and the European Parliament will now negotiate the final rules, which also include expanding the levy to new products like washing machines and car parts. To address aluminum loopholes, lawmakers reduced the threshold for applying the carbon border fee to aluminum shipments from 50 metric tonnes to just 5 metric tonnes, targeting the import of high-value, low-weight aluminum components crucial for industries like automotive and solar energy.