EXCLUSIVE- The European Union looks set to give Egyptian exports an exemption from its carbon tax until the end of 2027. Two Egyptian government officials tell us the exemption from the Carbon Border Adjustment Mechanism (CBAM) will give energy-intensive manufacturers in Egypt — specifically in the iron, steel, cement, and fertilizer sectors and at a later stage electricity and green hydrogen — a crucial two-year window in which to decarbonize before facing punitive border tariffs. We first exclusively reported last month that officials were pursuing the exemption.

Why this matters: Failure to comply with the carbon border tax or decarbonize at pace would cost local manufacturers an estimated USD 317 mn annually in carbon surcharges, according to Environment Ministry studies seen by EnterpriseAM, negatively impacting the competitiveness of our exports. By pushing the deadline, the Mabdouly government is both protecting the competitiveness of our exports and preventing an inflationary spike that would have hit the local market had producers passed on compliance costs.

This also buys time for officials to launch a domestic carbon tax framework, as under EU rules, any carbon price paid at home is deducted from the bill in Brussels. “This grace period gives us a greater chance to conduct an in-depth study of the short- and long-term repercussions the local tax will have on the competitiveness of Egyptian trade and the future of exports,” one of the sources told us.

The planned domestic carbon tax will now be introduced in a standalone bill instead of being buried in the new Income Tax Law as initially planned, we’re told.

In a bid to push local manufacturers to go green, the state is also mulling legislative amendments to the Environmental Protection Law, which would mandate a phased compliance schedule. To support its implementation, Egypt will also license local and international carbon credit rating agencies to provide binding emissions data verification needed for imposing the carbon tax.

What’s next? Officials are working out the details of the local carbon tax and expect to present it to the House of Representatives for debate and a vote later this year, one of our sources said. But the more important story over the next 24 months could be how proactively Egyptian industry pivots toward green production — because a delay is still just that: a two-year reprieve. We thinks the odds of our getting a second one are vanishingly low.

(** Tap or click the headline above to read this story with all of the links to our background as well as external sources.)

Tags: