March 03, 2026 | Reading time: 6 minutes
Too bureaucratic, too expensive, too protectionist opine the opponents – not consistent enough counter the advocates: Criticism of the CO₂ compensation mechanism CBAM, which has been in place since the beginning of 2026, continues unabated. Find out here why the instrument nevertheless remains indispensable for preventing carbon leakage and driving the decarbonization of industry forward.
German steel production is under pressure. The year 2025, output dropped to its lowest level since the financial crisis. Demand from the automotive and construction industries is lackluster, while China is pushing subsidized steel and steel products onto the global markets and Donald Trump is sealing off the US market. How can the EU prevent its own companies from coming under pressure from climate protection rules and EU emissions trading – with imports from countries without CO2 levies remaining cheaper?
To address this challenge, the EU has introduced the CBAM – the Carbon Border Adjustment Mechanism. In German, it is referred to as the "CO2 border adjustment system" or, put somewhat more casually, as a climate tariff. Regardless of which term you choose - the idea behind it is always the same: Importers from outside the EU should not be able to benefit from the fact that less stringent climate protection requirements apply in their countries. At the same time, the EU wants to prevent EU companies from relocating their production to countries with less rigorous environmental regulations. This practice, also known as carbon leakage, would increase overall global emissions and weaken value creation in Germany and Europe.
Cost disadvantage: 50 euros per ton of steel
The carbon border adjustment is therefore a means of creating fair conditions for climate-friendly industries in the EU and supporting their decarbonization strategies. This is because to date, there have been genuine cost disadvantages of around 50 euros per tonne of steel compared to producers in third countries. To bring this imbalance to an end as quickly as possible, CBAM must be implemented consistently.
There is, however, no protectionism behind CBAM: the CO2 border adjustment is not a customs duty but rather takes into account the climate costs incurred in the production of goods. Catherine Wolfram, Professor of Energy Economics at MIT in Boston, has pointed out that CBAM – unlike a tariff – treats imports in exactly the same way as domestic products. In future, companies wishing to sell their goods in the EU will have to prove how much CO2 they have caused in the manufacture of those products – such as steel, cement, aluminium or fertilizers – and then purchase EU-CBAM certificates to compensate for this. Their prices are based on those of the European Emissions Trading Scheme (EU-ETS), to which EU producers are subject. Both instruments are united by one idea: Producing in a more climate-friendly manner means paying less – and vice versa.
Simplifying implementation
The CBAM instrument is now also sending a price signal for imported products – thereby incentivizing manufacturers to increase their climate protection efforts. Gunnar Groebler: "Only with the right framework conditions will we be able to ensure a level playing field for a competitive future for the industry."
The criticism that CBAM will create a new bureaucratic monster for companies is partly justified: Mandatory default values could reduce the input involved and facilitate implementation without diluting the objective. The German Steel Federation regards the current solution as "half-baked" and insists on the inclusion, for example, of additional products and sectors such as steel processing, as otherwise there is a risk of entire value chains being relocated. In addition, circumventions – such as shifting low-carbon products to the EU market without actual climate protection efforts – should be prevented.
Green steel needs protection
When companies like Salzgitter AG commit billions in advance investment for the transformation to succeed, they need political support along the way. Competitive green steel not only calls for innovative technology, but also price signals for CO2. This will only work, however, if imports will also be tasked with shouldering their share. In this way, CBAM can contribute to securing value creation, jobs and climate protection in the EU.
Discover similar posts
CO₂ border adjustment – Driving green change in the steel industry
Since the beginning of 2026, CO₂ taxes have been levied on steel imports into the EU for the first time. Helge Langheim, Head of Foreign Trade Policy, Markets, and Statistics at Salzgitter AG, considers the CBAM to be necessary in creating climate protection incentives, not only for domestic producers but also for international competitors – despite criticism voiced concerning bureaucracy and potential loopholes.
Read interview
“Pragmatic regulation, not deliberate competitive disadvantages”
Lennart Schümann, an energy strategy and procurement expert at Salzgitter AG, explains what the Group needs on the road to green steelmaking – and how and what policymakers must deliver.
Read interviewThe address of this article has been copied to your clipboard.