Italy and France underscored the need for the European Commission to reassess the EU's Carbon Border Adjustment Mechanism (CBAM) to bolster the competitiveness of European industries amid the ongoing challenges of decarbonization.

Italy's Minister of Enterprises and Made in Italy, Adolfo Urso, met with France's Minister of Industry and Energy, Marc Ferracci, on Feb. 11, where they both called for the inclusion of CBAM as a key agenda item at the forthcoming EU Competitiveness Council meeting on March 6.

"We cannot allow strategic European sectors, such as steel and chemicals, which are essential for our industrial autonomy and for the economic stability of the continent, to be penalized by a system that does not take into account the real conditions of global competitiveness," said Urso in a statement.

This comes as there has been a growing call among policymakers, politicians, and industry leaders to simplify the EU's carbon border tax as the Commission tries to balance industrial growth with environmental goals.

"The geopolitical context requires Europe not to depend on external actors for essential materials and technologies. It is therefore crucial to correct the CBAM so that it is a truly effective tool, capable of protecting European industrial production and at the same time encouraging a sustainable transition in practice, not just in principle," added Urso.

Streamlining CBAM

On Feb. 6, EU Commissioner for Climate, Net-Zero, and Clean Growth, Wopke Hoekstra, admitted that his team is considering excluding around 80% of EU companies from the Carbon Border Adjustment Mechanism to reduce their administrative and bureaucratic workload.

Hoekstra stated that almost 97% of all emissions covered by CBAM are produced by only 20% of companies, highlighting the need for some flexibility in implementing this carbon border levy.

CBAM is a carbon tax on emission-intensive commodities exported to the EU, currently covering the cement, iron and steel, aluminum, fertilizer, electricity, and hydrogen sectors. The levy is designed to reflect the difference between EU carbon prices and carbon costs in exporting countries.

With the definitive phase of the EU's CBAM set to kick in on Jan. 1, 2026, importers of carbon-intensive goods will face levies based on the emissions associated with their imports.

Under the transitional phase of CBAM, which started on Oct. 31, 2023, traders must only report on emissions embedded in their imports without paying any financial adjustment. However, this mechanism will be phased in from 2026 to 2034, in line with the phasing out of free allowances in the EU ETS.

The decline in industrial and manufacturing output contributed to a reduction in the European carbon price last year. However, prices have rebounded significantly in early 2025. The suspension of Russian gas transit through Ukraine has led to higher coal power generation, pushing up demand for carbon permits.

EU Allowances averaged Eur66/mtCO2e ($68.13/mtCO2e) in 2024, down more than 20% year over year, S&P Global Commodity Insights data showed.

Platts, part of Commodity Insights, assessed EUAs for December 2025 delivery at Eur82.41/mtCO2e on Feb. 11.