The Exporters' Club is asking the EU to "put its climate policy on hold" to avoid harming industry.

Industrial Competitiveness

The Exporters' Club, through a technical note, warns that the Emissions Trading System (ETS) and the Border Adjustment Mechanism (BAM) are generating a "cost shock" that reduces the competitiveness of European industry, proposing a moratorium on both instruments.

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The Exporters' Club warns of a "cost shock" due to the EU's climate policy

The decarbonization strategy of Unión Europea This is generating a serious threat to the competitiveness of its industrial fabric. According to a Technical Note prepared for the Club de Exportadores by Antonio Merino, trade technician and state economist, the two main instruments of community climate policy, the European Emissions Trading System (ETS) and the Carbon Border Adjustment Mechanism (CBAM)These factors are causing a cost escalation that is deteriorating the position of European companies against international competitors with more lax regulatory and energy environments.

The analysis of Merino The conclusion is clear: the combined application of both mechanisms amounts to "the introduction of an internal tariff." This situation arises because European producers are forced to internalize the cost of carbon in their inputs, both energy and materials, while their rivals in third countries, often with cheaper energy and without equivalent CO₂ emissions pricing, operate with significantly lower cost structures.

The impact of CBAM and the rising cost of carbon

The expert points out that, while the CBAM can partially mitigate the effect of ETS The import of basic inputs such as steel, aluminum, fertilizers, or cement leaves the manufacturing industries unprotected. These industries, which concentrate a large part of the added value of the European economy, do not have their imports subject to the same restrictions. CBAMHowever, they do suffer from increased costs throughout their entire value chain. In fact, the mechanism could even add additional costs to production chains.

Pressure has intensified since the path for reducing the emissions ceiling was tightened in 2021. ETScausing the price of the emission allowance to reach 100 euros per ton of CO₂ in 2022. This additional cost has a direct impact on industrial costs, especially in high energy consumption sectors. Antonio Merino It offers a clear example in the automotive sector, where it estimates that, at that price, "the cost of carbon emission allowances could be between 600 and 800 euros per vehicle." For manufacturers with operating margins of 3% to 6%, this cost could absorb "a significant fraction of the unit profit, between 30% and 70%."

Impact of Carbon Costs on Industry (at €100/ton of CO₂)

Concept	Estimated Impact
Added cost per vehicle (automotive sector)	Between 600 and 800 euros
Reduction in unit profit (automotive)	Between 30% and 70%
Additional cost in electricity generation with natural gas	30 euros per MWh
Additional cost in electricity generation with coal	90 euros per MWh

Risks to exporting and the need for a strategic review

The effect on external competitiveness is even more pronounced, since products manufactured in Europa They bear this additional cost, while their international competitors do not bear equivalent burdens. Merino It warns that since 2021 a reduction in exports of CO₂-intensive goods due to this loss of competitiveness. Looking ahead, the scenario could worsen if the price of CO₂ reaches 250 euros per ton, which would drive up the price of electricity.

Given this situation, the report's main recommendation is clear: "to put the ETS-CBAM system on hold." Furthermore, it proposes substantially moderating the price of carbon to align it with the levels of competing countries and excluding from the ETS to strategic sectors such as fertilizers, whose increased cost has "very clear" inflationary effects on food security and agricultural prices.

The conclusion of the Technical Note underscores the importance of geopolitical realism. "Decarbonization does not eliminate global demand for energy-intensive goods; it simply shifts their production to regions with lower regulatory and energy costs," it warns. MerinoTherefore, it urges "complementing current instruments with a strategy that combines decarbonization, competitiveness and geopolitical realism" to preserve Europe's industrial base during the energy transition.

Frequently Asked Questions (FAQ)

What are ETS and CBAM and why are they controversial for the industry?

El ETS The Emissions Trading System (ETS) is a market where rights to emit CO₂ are bought and sold. CBAM The Carbon Border Adjustment Mechanism (CBFM) is a tariff on imports of certain carbon-intensive products. According to the Club de Exportadores, their combination raises production costs in Europareducing competitiveness compared to countries without these burdens.

How does this policy affect a key sector like the automotive industry?

According to the analysis of Antonio MerinoWith CO₂ emissions at €100 per ton, the cost of emission allowances could add between €600 and €800 to the manufacturing cost of each vehicle. This could reduce manufacturers' unit profit by between 30% and 70%, a very significant impact on their margins.

What is the main recommendation of the Exporters Club?

The central proposal is to "put the ETS-CBAM system on hold," that is, to apply a moratorium to both mechanisms. Additionally, it is recommended to moderate the price of carbon and exclude strategic sectors such as fertilizers from the system to avoid a greater impact on inflation and food security.

What geopolitical risk does the current EU climate policy pose?

The main risk is industrial relocation. By increasing production costs in EuropaCompanies could relocate their operations to regions with lower energy and regulatory costs. This would not reduce global emissions, but would simply shift production and weaken Europe's industrial base.