Egypt asks Brussels for preferential treatment as EU’s carbon border levy nears

The government is negotiating with Brussels again over “preferential treatment that gives Egyptian exports a longer chance” under the EU’s carbon border levy as the mechanism nears full application, a senior government official tells EnterpriseAM. It’s also reviewing how countries in Asia and Latin America handled the mechanism to work out its options.

“What we are seeking now is a phased timetable aligned with a number of Egyptian environmental measures so that Egyptian goods in the designated sectors keep reaching the European Union more easily,” another government official tells us, adding, “usually the European Union does not agree to grant exemptions.”

One scenario under study has Egyptian exporters carrying part of the cost in the markets that apply the mechanism, rather than rushing a domestic system into place, they say. That option is hard to execute because it needs the technical and institutional capacity to measure and verify emissions, plus a domestic carbon-pricing system, they say.

REMEMBER- Government officials told us in December that a formal request for a temporary exemption had gone in and in January that the EU had tacitly approved it. Nothing papered that approval. Anything that keeps part of the carbon bill inside Egypt runs through a different rule: EU importers may deduct a carbon price already paid in the country of production, provided it can be documented. So the work is domestic — a carbon price of Egypt’s own and plant-level emissions data verified to European standards, the capacity the second official says is not there yet. There is a carbon-governance bill drafted by an MP, published in September, but it’s not a Cabinet bill.

Failing to comply or failing to win preferential treatment would cost local manufacturers about USD 317 mn a year in added carbon pricing, according to Environment Ministry studies we reported last year, with steel carrying 74% of the hit at roughly USD 236 mn a year, followed by aluminum at about USD 43 mn.

The World Bank says the country’s real income could shrink by around 0.6% without adapting to CBAM, with some carbon-intensive exports falling as much as 8.3%. The charge lands first on steel, cement, aluminum, and fertilizer exporters, and the list is still widening. Polymers and organic chemicals are due to join in 2027, with fabricated steel and aluminum products such as nails and fasteners following in 2028, as experts told us last year.

Why it matters: Any cost Cairo imposes to meet the levy cannot be confined to export volumes, the second official says, so part of it would pass through to the home market at a moment when inflation is rising again. And the first tranche of UN carbon certificates, whose purchase window the Environment Ministry has just closed, cannot offset the levy, they say, adding that compliance needs a real cut in the emissions behind the exported goods.

What’s next: The government doesn’t want to rush new measures before studying their effects, the second official says, and it wants a mechanism that meets the levy’s rules without hurting investment. The issue is still under study across ministries, and the Cabinet leads it, they add. The second official wouldn’t give a date for a decision but expects the picture to clear soon, with obligations on importers of Egyptian goods coming due.