Fit for 55 could weaken EU industrial competitiveness

Significance Further strengthening of the EU Emissions Trading System (ETS), combined with phasing out free allocations and introducing a Carbon Border Adjustment Mechanism (CBAM), looks likely to expose European industry to upward cost pressures at a time when they need capital to invest in emergent low-carbon industrial processes. Impacts 'Carbon leakage' remains a big concern: while relocation usually has multiple motivations, it may well increase as EU carbon costs rise. Supply chain pressures look likely to push costs up both for EU industry and the renewables sector. Major investment opportunities exist in the areas of renewable energy and alternative fuels infrastructure.