Russian steel producers aim to reduce the impact of EU carbon tax

The Russian Steel Association says that the Carbon Borders Regulation Mechanism (CBAM), which the EU plans to implement in 2026, is fraught with significant risks to the global economy and the steel industry, in particular, notes Kallanish.

“The inclusion of the steel sector in the scope of EU border carbon emissions regulation could have a significant negative impact on the development of the industry,” says Russian Steel. “The current project of the European Commission (EC) is selectively approaching the selection of goods in the sectors included in the scope of the new collection, including metallurgy. We believe this approach fails to be tested against the EU's stated climate targets and could lead to significant market imbalances. ”

The impact of the tax on Russian exporters remains unclear. The European Commission should develop by-laws to regulate the calculation of the carbon footprint, says the association, which represents major Russian steel producers such as NLMK, Evraz, Mechel, MMK, TMK, Severstal, PMH, OMK and Metalloinvest.

“Until this information is received, no industry will be able to assess all the potential implications of border regulation of EU carbon emissions,” notes Russian Steel. "However, it is already clear that calculations using a complex European methodology and mandatory external verification of emissions can become a serious administrative barrier for supplies to the EU."

Therefore, the association believes that after the introduction of the measures, the EU's trading partners will initiate a dispute resolution procedure in the WTO in order to achieve deregulation. “It should be borne in mind that, firstly, the procedure for resolving disputes in the WTO usually takes more than two years, but today the Appellate Body does not work,” notes Russian Steel. "Secondly, the ultimate goal of the WTO dispute resolution procedure is to remedy the violation ... [although] winning a dispute does not give the right to claim compensation for losses incurred by the business."

The association adds that even if the carbon tax were lifted following a dispute, suppliers in the EU would suffer irreparable losses and, most importantly, irrevocably lose their position in a highly competitive market.

Russian Steel concludes that it would be prudent for Russian government officials to start negotiations immediately in order to protect the interests of domestic exporters, including iron and steel products, from the impact of the EU carbon tax.
Source: Kallanish