LONDON — Reform UK would scrap Britain’s planned carbon border tax if it wins power, the party’s business and trade chief Richard Tice has said.  Speaking to POLITICO on Tuesday, Tice vowed to ditch the U.K.’s new carbon border adjustment mechanism (CBAM) as part of a broader rollback of climate levies.  Reform would look “to promote oil and gas, but also scrap all these levies and green taxes, CBAM, the whole lot of it all goes,” he said.  Britain is currently drawing up its own carbon tax regime — which would charge importers of carbon-intensive goods a fee based on their carbon emissions. Ministers plan to link the regime to the EU’s equivalent scheme as part of their wider effort to reset post-Brexit trade ties — in a move designed to shield British exporters from being hit by Brussels’ carbon border tax. Business groups warn that scrapping the system could backfire.  “It is an illusion that cutting CBAM or cutting carbon prices would have a long-term benefit for U.K. competitiveness,” said Adam Berman, director of policy and advocacy at Energy UK.  The short-term consequence of scrapping the policy, he argued, would be to leave British exporters facing “a substantial new tax at the border on their exports with Europe.” In the longer term, Britain would be increasingly locked out of key markets, not just Europe, Berman said.  “Major trading blocs around the world are doing the same thing,” said Berman. “In that context, we are going to see a proliferation of CBAMs around the world. China doesn’t have one today, but you can be certain they will implement one at some point in the future.  “India doesn’t have one today, but we can be absolutely certain that it will come as soon as they have a robust domestic carbon price. They will want to protect their industrial base from unfair competition.”  TICE WARNS EU ‘CHANGE IS COMING’ Tice made clear the carbon border tax would not be the only casualty.  Reform UK has already pledged to shred Keir Starmer’s EU reset if they get into power. | Pool photo by Andy Rain via EPA “There are going to be aspects that this government is negotiating with the EU that we will unwind immediately,” he said. “There will be some significant renegotiations in a number of different areas.” Reform has already pledged to shred Keir Starmer’s EU reset if they get into power — with the EU reportedly weighing a “Farage-clause” to protect the deal from regressing.  Other than CBAM, Tice pointed to several aspects of the reset, including the agri-food deal, Erasmus participation, and the SAFE loan program for defense procurement.  “They need to understand that change is coming,” he warned. “We shouldn’t be paying vast amounts of money for SAFE, we shouldn’t be rejoining Erasmus at vast cost for no benefit to ourselves whatsoever,” he added. “We shouldn’t be dynamically aligning with any of their rules. Remember, this is an EU where, even though we’re flatlining, actually, Germany and France’s economies are in even worse shape than our own. Why would you handcuff yourself to a failing economic model?” ‘PRO-BRITISH’ PROCUREMENT PUSH Alongside the rollback of green levies, Tice signaled a more interventionist industrial strategy at home.  More details on a pro-British procurement strategy will be unveiled next week, he said, centered on a “strong presumption in favor of buying steel manufactured in the U.K.”  The proposed steel mandate would apply to infrastructure including rail, defense, housing construction and public buildings. Tice also said the new mega Chinese embassy should be built using British steel. Tice acknowledged there are limits to how far such a policy could go.  A blanket mandate to use British steel risks breaching World Trade Organization non-discrimination rules — a legal constraint that would need to be navigated.

BRUSSELS — For once, Europe’s heavy industry is lobbying to save a climate law.  Manufacturers are worried the European Commission is undermining the bloc’s new carbon tariff regime, a key pillar of EU climate policy, with a plan to give itself discretionary powers to suspend parts of the new measure. They warn the move is throwing investment plans into disarray and threatening much-needed decarbonization projects. The EU executive wants to grant itself the power to exempt goods from the just-launched carbon border adjustment mechanism (CBAM), which requires importers of certain products to pay for planet-warming pollution emitted during the production process.  This levy is designed to protect European manufacturers — which are obliged by EU law to pay for each ton of CO2 they emit — from being out-competed by cheaper, dirtier imports. Importers of Chinese steel, for example, now pay the difference between Beijing’s carbon price and the bloc’s, ensuring it bears the same pollution costs as made-in-EU steel.  The prospect of having that protection yanked away by the Commission has spooked European manufacturers — particularly after a dozen EU governments immediately started campaigning to apply the exemption to fertilizers in an effort to protect farmers from higher import costs.  CBAM “is linked to investment, but it’s also linked to survival, actually, of some members,” said Antoine Hoxha, director of industry association Fertilizers Europe. “We can compete with anyone on a level playing field. But we need that level playing field.”  Fertilizer producers aren’t the only ones worried. Most major industry bodies representing CBAM-covered sectors in Brussels — which, aside from fertilizers, include steel, iron, aluminum, cement, hydrogen and electricity — told POLITICO they and their members had concerns about the Commission’s plans.  They warn that the new exemption clause, besides opening EU companies to unfair competition, risks undermining CBAM’s other goal of encouraging the bloc’s trading partners to switch to cleaner production methods, as it creates uncertainty over the level of EU demand for low-carbon imports.  “We see this as some kind of sword of Damocles. If it remains like this, it’s going to send a really discouraging signal to European and international investors, and that will seriously slow down industrial decarbonization,” said Laurent Donceel, industrial policy director at Hydrogen Europe. “We would urge lawmakers to reconsider this, because we feel it undermines the entirety of CBAM.”   Lawmakers in the European Parliament, worried about a domino effect if the Commission gives in to demands to exempt fertilizers, appear to be listening. In an environment committee meeting last week, MEPs from the far left to the center right criticized the EU executive’s proposed clause.  The changes still need the approval of MEPs and EU governments before they can come into effect, and “it is unlikely there is a majority to do so in the Parliament,” said Pascal Canfin, a French MEP and environmental coordinator of the centrist Renew group. “Precisely because it would trigger other requests and empty [out] the CBAM.”  VAGUE WORDING The Commission proposed the suspension clause, known as Article 27a, in mid-December as part of a host of other changes to CBAM. The clause initially flew under the radar before governments seized on it to demand the exemption of fertilizers in early January.  The new article gives the EU executive the power to remove goods from the mechanism in the event of “severe harm to the Union internal market due to serious and unforeseen circumstances related to the impact on the prices of goods.” The exemption remains in effect “until those serious and unforeseeable circumstances have passed.”  Industry representatives warn that this wording is so exceedingly vague — setting no time limit or trigger threshold — that it leaves CBAM vulnerable to political pressure campaigns.  Case in point: Fertilizers. A group of 12 governments has argued that CBAM has pushed up costs for farmers, and should trigger a suspension. But analysts and manufacturers dispute the idea that the new levy is to blame for high fertilizer costs, while also noting that increasing import prices due to CBAM are anything but unforeseen.  Farmers “are caught in between high energy prices that lead to high fertilizer prices on one side, and on the other side agriculture commodities prices have gone down, so they are in a squeeze and they need a real solution,” said Hoxha from Fertilizers Europe. “But it’s not this.” After a meeting with agriculture ministers in January, the Commission also clarified that any exemption under Article 27a would apply retroactively — causing “shock” among industry, Hoxha said. Exempting goods from CBAM also weakens the EU’s carbon market, the Emissions Trading System (ETS), which obliges companies to buy permits to cover their pollution.  Before the levy came into effect, the bloc shielded its manufacturers from cheaper foreign competition by granting them a certain amount of ETS permits for free — a practice that has been criticized for undermining the case for decarbonization. With CBAM launched, those pollution subsidies will be phased out.  But the Commission confirmed to POLITICO that if a product is exempted from CBAM, the affected companies would continue receiving free pollution permits: “The … reduction of the free allocations for the relevant period would not apply,” a Commission spokesperson said.  CROSS-INDUSTRY CONCERN The proposed clause has sent shockwaves through industry beyond the fertilizer sector.  “Such emergency procedures create legal uncertainty with regards to a cornerstone of the EU’s climate policy,” steel producer association Eurofer said in a statement, noting that increasing import prices are an intentional feature of the system, not an unforeseen bug. Cement Europe is “concerned that Article 27a would introduce major legal uncertainty into CBAM. An open‑ended exemption for ‘unforeseen circumstances,’ potentially even applied retroactively, risks undermining the predictability industry needs,” the association’s public affairs director Cliona Cunningham said.   At Eurelectric, which represents Europe’s electricity industry, “some of our members have expressed concern about the way Article 27a has been introduced,” the association said in a statement, also stressing the need for predictability.  “If there is a perception that CBAM obligations can be lifted for political or undefined unforeseen reasons, this may weaken incentives to invest in local decarbonisation and low-carbon production both within the EU and beyond,” Eurelectric warned.  Hydrogen Europe’s Donceel said that for producers of fertilizer, including hydrogen-derived ammonia, “this is becoming a huge issue … even before it gets adopted or comes into force — already, the possibility of an exemption is wrecking the business case for a lot of our members and a lot of key companies in these sectors. So this Article 27a definitively came as a shock.”  Only some metals producers supported the Commission’s proposal.  Given that CBAM is a new and complex policy, a suspension clause “is just realistic and good policymaking,” European Metals director James Watson said in a statement. “No regulatory system is flawless from the outset; an emergency brake, activated in certain conditions, is a matter of common sense.” His association represents producers of metals other than iron and steel. European Aluminium, which considers CBAM insufficient to protect their sector from unfair competition, wants to see Article 27a more clearly defined. But in general, “we see it basically as an emergency clause that our sector always wanted,” said Emanuele Manigrassi, the association’s climate director.  MIFFED CLIMATE CHAMPIONS In response to questions, a Commission spokesperson sought to reassure industry that CBAM “is not being cancelled for any of the sectors in scope” and that it was committed to providing “regulatory certainty for companies to move forward with their investments, especially for projects aiming to produce low-carbon products and reduce greenhouse gas emissions.”  Yet the proposal has especially rankled companies that see themselves as frontrunners in decarbonizing their industries, taking on the risk of early upfront investments. “You need to have a strong and predictable framework on carbon pricing, especially to back up industry frontrunners,” said Joren Verschaeve, who manages the Alliance for Low-Carbon Cement and Concrete. “The risk with a provision as proposed like Article 27a is that you inject uncertainty in this whole market … I think this is the last thing we need right now.”  The carbon border tax is also meant to encourage other countries’ industries to switch to cleaner production, as low-carbon imports are subject to lower CBAM fees.  But for companies already planning to ramp up climate-friendly manufacturing outside the EU in response to CBAM, the Commission’s move has also raised questions about whether there will be sufficient demand for their low-carbon imports to warrant the investment.  Norwegian fertilizer giant Yara International recently warned it would have to rethink a multi-billion low-carbon project if the mechanism was suspended. “It’s a huge concern to us, and the uncertainty grows every day. We want to reduce our emissions, but we will not do it purely out of goodwill. We need a clear business case, and CBAM is a key enabler here,” said Tiffanie Stephani, vice president for government relations at Yara.  “Any suspension would undermine the very companies that are taking concrete steps to decarbonize,” she added. 

LONDON — British students will once again be able to take part in the EU’s Erasmus+ exchange scheme from January 2027 — following a six-year hiatus due to Brexit. U.K. ministers say they have secured a 30 percent discount on payments to re-enter the program that strikes “a fair balance between our contribution and the benefits” it offers. The move is one of the first tangible changes out of Keir Starmer’s EU “reset,” which is designed to smooth the harder edges off Boris Johnson’s Brexit settlement while staying outside the bloc’s orbit. In an announcement on Wednesday Brussels and London also confirmed they were formally beginning negotiations on U.K. re-entry into the EU’s internal market for electricity. Both sides hope the move, which was called for by industry in both sides of the Channel, will cut energy bills while also making it easier to invest in North Sea green energy projects — which have been plagued by Brexit complications. They also pledged to finish ongoing talks on linking the U.K. and EU carbon trading systems, as well as a new food and drink (SPS) deal, by the time they meet for an EU-U.K. summit in 2026. The planned meeting, which will take place in Brussels, does not yet have a date but is expected around the same time as this year’s May gathering in London. The announcements give more forward momentum to the “reset,” which faltered earlier this month after failing to reach an agreement on British membership of an EU defense industry financing program, SAFE. The two sides could not agree on the appropriate level of U.K. financial contribution. The pledge to finalize carbon trading (ETS) linkage next year is significant because it will help British businesses avoid a new EU carbon border tax — CBAM — which starts from Jan. 1 2026. While the tax, which charges firms for the greenhouse gas emissions in their products, begins on Jan. 1, payments are not due until 2027, by which time the U.K. is expected to be exempt. But it is not yet clear whether British firms will have to make back payments on previous imports once the deal is secured, and there is no sign of any deal to bridge the gap. WIDENING HORIZONS EU Relations Minister Nick Thomas-Symonds, who negotiated the agreement, said the move was “a huge win for our young people” and would break down barriers and widen horizons so that “everyone, from every background, has the opportunity to study and train abroad.” European Parliament President Roberta Metsola welcomes British Minister for the Constitution and European Union Relations Nick Thomas-Symonds. | Ronald Wittek/EPA “This is about more than just travel: it’s about future skills, academic success, and giving the next generation access to the best possible opportunities,” he said. “Today’s agreements prove that our new partnership with the EU is working. We have focused on the public’s priorities and secured a deal that puts opportunity first.” The expected cost of the U.K.’s membership of the Erasmus+ program in 2027 will be £570 million. Skills Minister Jacqui Smith said Erasmus+ membership is “about breaking down barriers to opportunity, giving learners the chance to build skills, confidence and international experience that employers value.” Liberal Democrat Universities Spokesperson Ian Sollom also welcomed U.K. re-entry into the exchange scheme but said it should be a “first step” in a closer relationship with the EU. “This is a moment of real opportunity and a clear step towards repairing the disastrous Conservative Brexit deal,” he said. “However while this is a welcome breakthrough, it must be viewed as a crucial first step on a clear roadmap to a closer relationship with Europe. Starting with negotiating a bespoke UK-EU customs union, and committing to a youth mobility scheme for benefit of the next generation.”

Anchal Vohra is a Brussels-based international affairs commentator. On a smog-filled day in New Delhi, I watched as a few German cars struggled to navigate a massive traffic jam. A British SUV was also in the mix, trailing not so far behind. Last year, these foreign cars accounted for only 0.1 percent of India’s imports, with Germans in the lead and the British coming in a near second. However, British businesses have gained an edge ever since the U.K. and India inked a free trade agreement earlier this year, with India finally lowering its protectionist guard. Once this deal fully comes into effect, overall bilateral business is expected to grow by more than 50 percent in about a decade-and-a-half, as New Delhi slashes its car tariffs from 100 percent to 10 percent, and its tariffs on scotch from 150 percent to 40 percent over a period of 10 years — all despite the cost to its domestic industries. It also gains particular advantage for its textile sector, which was hard hit by U.S. President Donald Trump’s 50-percent tariff, removing tariffs on Indian textiles exported to the U.K. The EU, meanwhile, remains the single largest market in the world, with a much higher chance of growing its exports to a country packed with over 1.46 billion consumers. Yet, negotiations between New Delhi and Brussels are forever hitting roadblocks, even as negotiators shuttle between the two capitals to get a deal across the finish line — a deadline that’s now been postponed to Jan. 26. And as these talks continue, the bloc could stand to learn from the flexibility of its former member. According to an Indian official in New Delhi, granted anonymity in order to speak freely, the biggest barriers to an agreement are currently the EU’s insistence on greater market access in the politically sensitive agriculture sector, and its insistence on a carbon tax under the Carbon Border Adjustment Mechanism (CBAM). On top of all this, the bloc’s protectionist tendencies — displayed by its higher tariffs on steel and its recent decision to curb rice imports from India — are also unexpected hurdles. In contrast to this rigidity, India’s concessions in its deal with the U.K. emerged from the flexibility it was granted in the agriculture sector, which was largely insulated from British products, the official said. “For all its faults, [the U.K.] understands India and Indians better.” Nearly half of Indians depend on agriculture for their livelihood, and farmers make up a strong voting bloc that holds strong political clout. Back in 2021, farmer protests even forced Prime Minister Narendra Modi to withdraw agricultural reforms and apologize. In fact, I have been told by former Indian officials and experts that the U.S. tariffs on India weren’t punishment for the country’s purchase of Russian oil, as Trump has claimed, but rather for its refusal to let U.S. food products flood the country. Nearly half of Indians depend on agriculture for their livelihood, and farmers make up a strong voting bloc that holds strong political clout. | Jagadeesh Nv/EPA “The interests of our farmers are top priority. India will never compromise on the interests of its farmers, dairy farmers and fishermen,” Modi had said at the time. But these same differences now threaten the EU-India relationship before it even properly takes off. “The Europeans could learn from the British,” the Indian official noted. “They excluded dairy, chicken and apples from the deal,” he explained, listing products particularly important to India. “In exchange, we let them bring in salmon, cod and lamb.” He also alluded that India could consider dropping tariffs on cars and wine if the bloc kept out of agriculture: “In liquor, luxury cars and wine, there is always room, since that doesn’t affect our most vulnerable people.” Instead of any such changes,, however, India is now growing peeved by what it sees as last-minute pressure tactics by Brussels. Just this month, the EU decided to “limit rice imports from India” and other Asian countries to the benefit of domestic rice growers and millers. And the bloc’s unexpected decision to spike tariffs on steel imports outside its quota to up to 50 percent has rattled Indian negotiators. New Delhi was already opposed to the EU’s incoming carbon tax, believing it would make its steel exports uncompetitive. The Secretary of India’s Ministry of Steel Sandeep Poundrik described the European carbon tax as a bigger threat to Indian exports than Trump’s tariffs. On top of all this, the bloc’s protectionist tendencies — displayed by its higher tariffs on steel and its recent decision to curb rice imports from India — are also unexpected hurdles. | Piyal Adhikary/EPA Moreover, some experts like former trade negotiator for India Sangeeta Godbole argue the EU stands to gain more from an FTA whereas India stands to lose if the carbon tax provision isn’t reconsidered. “Nearly 80 percent of Indian exports to the EU even now face miniscule tariffs below 1 percent,” she noted recently, demanding India shield exports “from excessive environmental rules” the EU is trying to impose. To that end, the country has decried the bloc’s tax on carbon intensive imports via CBAM as a violation of the Common But Differentiated Responsibilities (CBDR) principle, which doesn’t hold developing countries equally responsible for climate change due to differences in historical contributions and the state of their economic development. And here, too, India argues, the understanding with the British could be emulated. Although it failed to gain an exemption on the U.K.’s version of the carbon tax, India has reserved the right to retaliate if the FTA’s benefits are negated by this tax. For its part, the EU claims the carbon tax is intended to encourage the use of clean energy in heavy polluting industries. And as Commissioner for Trade Maroš Šefčovič said back in September: “We also need an understanding from the Indian side that we also have our constituency, we also have our audience” to consider — especially after the farmer protests over the recent deal with Mercosur nations. Meanwhile, the EU is also concerned about whether a deal with India might end up benefiting China. The bloc is desperately trying to reduce its dependence on Beijing in strategically important sectors and hoping India could replace it, but India itself is heavily reliant on China as well — for example, nearly half of the components in Indian semiconductors are imported from there. It also gains particular advantage for its textile sector, which was hard hit by U.S. President Donald Trump’s 50-percent tariff, removing tariffs on Indian textiles exported to the U.K. | Divyakant Solanki/EPA However, speaking with a highly placed EU insider who was granted anonymity, I learned the bloc is now ready to make concessions, offering to jointly manufacture cars to encourage India to lower its tariffs, to leave out access to certain agricultural products, and to possibly even relent on garment duties. And last week, negotiators went through sector by sector once more, trying to get a better deal for their domestic industries, trying to keep the balance sheet even. The truth is, India — home to a large number of people living below the poverty line despite its rapid economic growth — needs an FTA with the single largest market to attract foreign investment. But the EU needs India too.

BRUSSELS — The EU aims to seal a free-trade agreement with India by late January instead of the end of the year as initially envisaged, Trade Commissioner Maroš Šefčovič told POLITICO. “The plan is that, most probably in the second week of January, that [Indian Commerce Minister] Piyush Goyal would come here” for another round of negotiations, Šefčovič said in an interview on Monday. “There is a common determination that we should do our utmost to get to the [free-trade agreement] and use every possible day until the Indian national day,” he added. India celebrates its annual Republic Day on Jan. 26, and both Commission President Ursula von der Leyen and Council President António Costa have been invited as guests of honor. Von der Leyen and Indian Prime Minister Narendra Modi pledged in February to clinch the free-trade agreement (FTA) by the end of the year — something even they recognized would be a steep target. But a number of issues keep gumming up the works, Šefčovič said, including that India is linking its objections to the EU’s planned carbon border tax and its steel safeguard measures with the EU’s own demand to reduce its tariffs on cars. Šefčovič traveled again to New Delhi last week in an effort to clear major hurdles to conclude the EU’s negotiations with the world’s most populous country. “The ideal scenario would be — like we announced with Indonesia — that we completed the political negotiations on the FTA,” Šefčovič said. “That would be my ideal scenario, but we are not there yet.” The EU and Indonesia concluded their agreement in September. “It’s extremely, extremely challenging,” he said, adding: “The political ambition of our president and the prime minister to get this done this year was absolutely crucial for us to make progress.”

EU climate chief Wopke Hoekstra thinks reports of the death of Europe’s green agenda have been greatly exaggerated. “There’s always a lot of talk about backlash,” Hoekstra told POLITICO’s Sustainable Future Summit Tuesday. “That is, I think, one of the big misconceptions.” The EU’s new climate goal for 2040, agreed by ministers last month, “is actually an acceleration, rather than a downgrade, of what we are having today,” he said. The EU’s approach to its environmental and climate rules has been placed under extreme pressure from a combined pushback from far right parties, heavy industry and some leading members of Hoekstra’s own center right European People’s Party. That has led to the scrapping or weakening of some existing standards and made setting the 2040 target a brutal political fight. But Hoekstra said the realignment of some green policies was not about resiling from Europe’s environmental ambitions. “We’ll need to find a recipe — and I’ve been saying that over and over again — where we really make sure that climate, competitiveness and independence are being brought together. That in the end, is the winning formula,” he said. Hoekstra also pushed back on criticism by countries whose exports will be hit by the EU’s carbon border tax. This was a major feature of the recent COP30 climate negotiations, with large emerging economies like South Africa, India and China expressing concern about a measure they believe unfairly disadvantages their industries. Hoekstra dismissed that griping as a way to gain advantage in the course of the COP30 talks. “It is a tool that is being used, as quite often is the case in diplomacy,” he said. What he had heard “behind-closed-doors,” he said, was a completely different story. “Those who might have expressed their concerns publicly are not only acknowledging inside of a room that actually the effects are not that large, they’re actually even saying that it helps them to have a different type of conversation,” he said.

BRUSSELS — Europe’s most energy-intensive industries are worried the European Union’s carbon border tax will go too soft on heavily polluting goods imported from China, Brazil and the United States — undermining the whole purpose of the measure. From the start of next year, Brussels will charge a fee on goods like cement, iron, steel, aluminum and fertilizer imported from countries with weaker emissions standards than the EU’s. The point of the law, known as the Carbon Border Adjustment Mechanism, is to make sure dirtier imports don’t have an unfair advantage over EU-made products, which are charged around €80 for every ton of carbon dioxide they emit. One of the main conundrums for the EU is how to calculate the carbon footprint of imports when the producers don’t give precise emissions data. According to draft EU laws obtained by POLITICO, the European Commission is considering using default formulas that EU companies say are far too generous. Two documents in particular have raised eyebrows. One contains draft benchmarks to assess the carbon footprint of imported CBAM goods, while the second — an Excel sheet seen by POLITICO — shows default CO2 emissions values for the production of these products in foreign countries. These documents are still subject to change. National experts from EU countries discussed the controversial texts last Wednesday during a closed-door meeting, and asked the Commission to rework them before they can be adopted. That’s expected to happen over the next few weeks, according to two people with knowledge of the talks. Multiple industry representatives told POLITICO that the proposed estimated carbon footprint values are too low for a number of countries, which risks undermining the efficiency of the CBAM. For example, some steel products from China, Brazil and the United States have much lower assumed emissions than equivalent products made in the EU, according to the tables. Ola Hansén, public affairs director of the green steel manufacturer Stegra, said he had been “surprised” by the draft default values that have been circulating, because they suggest that CO2 emissions for some steel production routes in the EU were higher than in China, which seemed “odd.” “Our recommendation would be [to] adjust the values, but go ahead with the [CBAM] framework and then improve it over time,” he said. Antoine Hoxha, director general of industry association Fertilizers Europe, also said he found the proposed default values “quite low” for certain elements, like urea, used to manufacture fertilizers. “The result is not exactly what we would have thought,” he said, adding there is “room for improvement.” But he also noted that the Commission is trying “to do a good job but they are extremely overwhelmed … It’s a lot of work in a very short period of time.” Multiple industry representatives told POLITICO that the proposed estimated carbon footprint values are too low for a number of countries, which risks undermining the efficiency of the CBAM. | Photo by VCG via Getty Images While a weak CBAM would be bad for many emissions-intensive, trade-exposed industries in the EU, it’s likely to please sectors relying on cheap imports of CBAM goods — such as European farmers that import fertilizer — as well as EU trade partners that have complained the measure is a barrier to global free trade. The European Commission declined to comment. DEFAULT VERSUS REAL EMISSIONS Getting this data right is crucial to ensure the mechanism works and encourages companies to lower their emissions to pay a lower CBAM fee. “Inconsistencies in the figures of default values and benchmarks would dilute the incentive for cleaner production processes and allow high-emission imports to enter the EU market with insufficient carbon costs,” said one CBAM industry representative, granted anonymity to discuss the sensitive talks. “This could result in a CBAM that is not only significantly less effective but most likely counterproductive.” The default values for CO2 emissions are like a stick. When the legislation was designed, they were expected to be set quite high to “punish importers that are not providing real emission data,” and encourage companies to report their actual emissions to pay a lower CBAM fee, said Leon de Graaf, acting president of the Business for CBAM Coalition. But if these default values are too low then importers no longer have any incentive to provide their real emissions data. They risk making the CBAM less effective because it allows imported goods to appear cleaner than they really are, he said. The Commission is under pressure to adopt these EU acts quickly as they’re needed to set the last technical details for the implementation of the CBAM, which applies from Jan. 1. However, de Graaf warned against rushing that process. On the one hand, importers “needed clarity yesterday” because they are currently agreeing import deals for next year and at the moment “cannot calculate what their CBAM cost will be,” he said. But European importers are worried too, because once adopted the default emission values will apply for the next two years, the draft documents suggest. The CBAM regulation states that the default values “shall be revised periodically.” “It means that if they are wrong now … they will hurt certain EU producers for at least two years,” de Graaf said.

LONDON — Officials in Brussels have stalled new Brexit reset talks after EU countries clashed over the issue of British payments to the bloc.  Ambassadors from the bloc’s 27 member states on Friday failed to give the green light for negotiations on linking U.K. and EU emissions trading systems (ETS), as well as talks on an agri-food deal. Talks are set to resume on Tuesday.  The U.K. and EU agreed in principle to negotiate on the two topics at a summit in May. But only once member states give their approval can talks truly begin. The delay is a setback for British negotiators, who had hoped to get an ETS deal in place before the EU implements its new carbon border tax regime in the New Year. Without a deal in place by the end of December, British firms exporting carbon-intensive goods to the EU such as steel and cement will be hit by the taxes from Jan. 1. One EU diplomat with knowledge of Friday’s talks confirmed there was disagreement over the issue of how much the U.K. should pay to participate in the EU’s single market. A second official confirmed there was “political sensitivity” on the issue, with specific concerns over when the U.K. would be expected to pay.  “[Should it be] on the occasion of the next electricity trading agreement, as the majority of member states suggest? Or after that, as some member states still claim,” they said.  The same official added that there was also “frustration that other talks are lagging behind” on the more contentious issue of youth mobility. Both officials were granted anonymity in order to speak freely about the ongoing talks.  CARBON TAX HIT Adam Berman, director of policy and advocacy at Energy UK, said it was now “not realistic” that a linkage negotiation would be completed by the end of the year. This will be “problematic” for British firms, Berman said, which will suddenly be subject to the new tax from Jan. 1, with the energy sector likely to be hit the hardest. But it could also harm the EU, which could see emissions increase as it seeks to replace relatively “cleaner” U.K. imports. Meanwhile, the U.K.’s EU Relations Minister Nick Thomas-Symonds has said he wants a Sanitary and Phytosanitary deal — which would see the U.K. align with EU agri-food standards — up and running by 2027. | Stefan Rousseau/PA Images via Getty Images Another headache for both sides is the fact the new regime will apply in Northern Ireland, which has no hard border with the EU, meaning the region could become a backdoor into the EU market for high-carbon goods. Berman said there was speculation of a time-limited exemption from CBAM while the U.K. was in linkage negotiations with the EU. “The big question is — Can both sides have an honest conversation about what the implications might be if there isn’t an exemption from the beginning of next year?” he said. Nevertheless, Berman is hopeful of an eventual agreement, pointing out that the issue of ETS was “not highly politicized” like other, more contentious aspects of the reset like youth mobility. “There is a pretty high level of alignment between these two policy mechanisms in the U.K. and the EU and high levels of environmental ambition on both sides. So really there are more technical questions to resolve than there are political questions, which bodes well for the likelihood of an eventual positive outcome.” AGRI-FOODS DEAL Meanwhile, the U.K.’s EU Relations Minister Nick Thomas-Symonds has said he wants a Sanitary and Phytosanitary deal — which would see the U.K. align with EU agri-food standards — up and running by 2027. To meet this timeline, talks with the EU would need to be wrapped up sometime in 2026 so parliament has time to enact legislation.   The U.K. is also racing to negotiate a deal to join the EU’s €150 billion rearmament scheme by “mid-November.” EU member countries have until the end of November to submit their own plans detailing how they would spend their allotted shares of the €150 billion in loans.  London fears that, if the U.K. isn’t in the room when that happens, it could end up losing out. The issue of Britain offering financial payments to the bloc is also politically sensitive for the U.K. Responding to the reports, a spokesperson for Britain’s right-wing Conservative Party said the government’s post-Brexit reset had “turned out to be an outrageous hit job on British taxpayers, with demands from the EU for billions of pounds from our country.” “Starmer doesn’t have the backbone to stand up to Brussels, with their attempt to extort cash from us as a punishment for having the foresight to leave the EU,” they added.

BRUSSELS — What began as a push to free Europe’s businesses from crippling rules has morphed into yet another tactic to appease Donald Trump.  Since taking office, the U.S. president has repeatedly threatened to hike tariffs on EU goods unless the bloc agrees to roll back some of its laws that also apply to American companies. That presents Brussels with a dilemma. If it bows to the U.S. pressure, it risks ending up with strict regulations that only apply to European businesses — potentially destroying their competitiveness. Conversely, if it scraps the rules altogether, it abandons key aims like digital sovereignty and environmental protection. Enter the simplification agenda, Brussels’ new plan to get the best of both worlds. Cutting red tape is one of the few areas of policymaking on which EU countries largely agree; in fact, they want more of it. Later this week, European leaders meeting in Brussels will instruct the European Commission to speed up its work “as a matter of utmost priority, on all files with a simplification and competitiveness dimension,” according to draft conclusions obtained by POLITICO.  Driving home that message, 19 EU leaders — including Friedrich Merz of Germany, Emmanuel Macron of France, Giorgia Meloni of Italy and Donald Tusk of Poland — have issued a presummit appeal for “a systematic review of all EU regulations to identify rules that are superfluous, excessive, or unbalanced.” In a letter, obtained by POLITICO, they also called on Brussels to dismantle outdated rules, demanded a “constant stream” of simplification measures and urged self-restraint when it comes to new legislation. Still, the simplification drive is being spun as a way to address some of Washington’s concerns with what it sees as regulatory overreach by Brussels.  “Since Trump is willing to swallow a number of jokes — he doesn’t look too closely at it anyway — if we can say to him, ‘Donald, thank you very much, it’s thanks to you that we’ve cleaned things up a bit,’ why not?” asked Pascal Lamy, a former EU trade commissioner and head of the World Trade Organization. SWEEPING ROLLBACK In a bid to bring struggling European industries back from the brink, Commission President Ursula von der Leyen has made deregulation — or “simplification” — the North Star of her second term. In less than 12 months, her Commission has come up with plans to cut much of the red tape crafted during her first mandate, touching on almost all areas of EU law, from defense and agriculture to digital rules and the environment.  At first, the logic was straightforward: Fewer rules would be good for European companies struggling to remain competitive against their U.S. and Chinese rivals.  Now, the simplification push comes as a diplomatic gesture — to smooth relations with Washington after Trump made it clear that U.S. companies shouldn’t be bound by European rules he has denounced as discriminatory.  Commission President Ursula von der Leyen has made deregulation — or “simplification” — the North Star of her second term. | Thierry Monasse/Getty Images Under the trade deal von der Leyen struck with Trump at his Scottish golf resort in July, the Commission pledged that its green rules would “not pose undue restrictions on transatlantic trade.” The list agreed by the two sides included Europe’s rules on supply chain oversight, sustainability reporting, a carbon border tax and rules aimed at preventing the import of goods produced on deforested land. All have already been the target of simplification measures launched by the Commission.   Explaining the strategy, Danish Foreign Minister Lars Lokke Rasmussen likened it in an interview with POLITICO to a Kinder Egg — an Italian-made children’s treat with chocolate on the outside and a toy on the inside. Cutting red tape is in Europe’s “own self best interest. But at the same time, it also serves others’ interest as well,” explained Rasmussen, whose country holds the presidency of the Council, the bloc’s intergovernmental branch. Others say it’s not so clear cut.  “We can’t say on the one hand that we’re willing to pay for American strategic protection in terms of tariffs, and on the other hand that we’re not going to change our regulations for that, neither on data, nor on DMA, DSA, nor everything else that Americans criticize about what they see as our hyper-regulation,” Lamy said, referring to the twin pillars of EU tech regulation, the Digital Markets Act and the Digital Services Act.  The Commission stressed that while Washington and Brussels have agreed to look at ways to cut red tape, “this will not lead to a lowering of EU standards or legislation,” said Olof Gill, deputy chief spokesperson for the Commission.  “The EU has been firm on defending our fundamental principle — our legislative framework and our regulatory autonomy are not up for negotiation,” added Gill, whose remit covers trade.  LEADERS JUMP IN The letter from the 19 EU leaders intensifies the pressure on the EU executive from the bloc’s leading economies to keep deregulating — above all from Macron and Merz. Backed by their largest businesses, the two leaders have echoed U.S calls for the EU to ditch its supply chain oversight directive. But the European debate has the added benefit of having — apparently — convinced Trump’s new ambassador to Brussels, Andrew Puzder, that the EU’s drive to slash red tape is in its own essential interest.  “Chancellor Merz and President Macron have both said it should be repealed … not because that’s in America’s best interest. They’re saying it’s the best interest of Germany and France,” Puzder told a recent event in Brussels, referring to the supply chain rules. For a veteran like Lamy, the simplification imperative arose from internal EU pressure following strategy recommendations by former Italian Prime Ministers Mario Draghi and Enrico Letta. The former leaders warned that Europe must become more competitive or face the “slow agony” of decline. “If we look at the history of these simplification packages, they were entirely generated within the EU by pressure from employers,” Lamy said.  But even with the political wind in her sails, delivering on simplification won’t be a pleasure cruise for von der Leyen.  Negotiations on the first simplification package — aimed at cutting green reporting obligations for companies — nearly destroyed the coalition of political groups that elected her to a second term, while efforts to simplify Europe’s farming policy and budget have sparked another backlash from the agriculture sector.  National calls for massive cuts to EU rules have also drawn criticism from EU decision-makers who are reluctant to see trade talks or corporate interests derail the bloc’s green agenda.  “No one should be mistaken, we will not lower these standards because there is no competitiveness in a race to the bottom,” said Teresa Ribera, the Commission’s No. 2 and top competition regulator. Nor are European lawmakers giving up on the “Brussels effect” — whereby rules set by the EU set a standard for how business is done internationally. That EU rules should apply to foreign companies is “a fundamental element of … Europe’s normative power,” said Pascal Canfin, a centrist member of the European Parliament, who has worked on several of the simplification packages.  Hans von der Burchard and Nette Nöstlinger contributed to this report from Berlin. This story has been updated. 

BRUSSELS — The European Commission is drawing up a playbook to convince the Trump administration that Europe is serious about cutting red tape for American companies — but on its own terms. The EU executive told national envoys this week that it was preparing a “checklist” spelling out how Brussels would address President Donald Trump’s demands on its business rule books, five EU diplomats and officials told POLITICO.  The move comes after Trump’s trade department sent its position to the European Commission demanding that Brussels remove what the U.S. considers to be non-tariff barriers to trade — measures that EU officials see instead as core elements of the bloc’s regulatory sovereignty. The European Commission has repeatedly stressed that the bloc will not be unwinding any existing laws or regulations to suit Trump’s agenda. But having faced criticism over the EU-U.S. trade deal, EU officials are mindful to present the work on easing the regulatory framework as being in line with the bloc’s own ongoing deregulation agenda. This now includes nine simplification packages — known in the Brussels jargon as “omnibus” measures. “We don’t do ‘at your command,’” said one of the officials, who like others interviewed for this story was granted anonymity to discuss the confidential conversations. “We’re going to sell them our omnibus as concessions.”  EU trade chief Maroš Šefčovič and his U.S. counterpart Jamieson Greer spoke last Sunday, a European Commission spokesperson said earlier this week. FLIPPING THE NARRATIVE For Brussels, the move offers a chance to flip the narrative: Instead of bowing to Trump’s pressure, the EU executive is looking to frame its own deregulation push to show it is playing ball on their trade agreement — which was set down in writing in August and only referred briefly to some non-tariff barriers and the bloc’s business oversight rules. According to the diplomats, the Commission’s internal work will focus on areas explicitly mentioned in the statement agreed after Trump and Commission President Ursula von der Leyen shook hands on a deal in Scotland — including the EU’s carbon border tax, deforestation ban, supply chain transparency rules and its green reporting obligations.  This would exclude the EU’s digital rules, such as the Digital Services Act and the Digital Markets Act, which the Trump administration sees as censoring or discriminating against American companies. Commission Deputy Chief Spokesperson Olof Gill said the EU was focused on the “faithful implementation” of the joint statement, describing it as the basis for strategic cooperation. “The EU is now exploring the best path forward to implement all commitments made, with Commissioner Šefčovič engaging closely with U.S. counterparts,” Gill told POLITICO. “Our focus is on delivery and tangible results, ensuring that all next steps build on the joint statement and reflect a fair and reciprocal EU–U.S. trade partnership.” The checklist was first reported by Bloomberg. Marianne Gros contributed reporting.