site.btaEconomic and Social Council Warns of “Carbon Leakage” Risks to Bulgarian Jobs

Economically, Bulgaria is heavily dependent on carbon-intensive industries and is particularly vulnerable to the risk of production relocating to countries with weaker environmental standards, the so-called “carbon leakage”, resulting in job losses and reduced economic activity. It is crucial for the Bulgarian government to closely monitor the implementation of the EU Carbon Border Adjustment Mechanism (CBAM) and to develop tools to assess its impact on the national economy, enabling informed feedback to the European Commission.

The issue was highlighted by Bulgaria’s Economic and Social Council (ESC) in an analysis adopted at its plenary session titled “Carbon Border Adjustment Mechanism (CBAM): Challenges for Bulgarian Industry and Ways to Overcome Them”.

According to the analysis, the reduced competitiveness of European manufacturers compared to importers of goods produced outside the EU poses a real and serious economic challenge. In recent years, the European economy has fallen behind those of the United States and China. The EU’s share of the global economy has dropped from 25.8% in 2004 to 17.6% in 2024. Over the same period, the EU’s share of global exports fell from 18.9% to 14%, particularly pronounced in heavy industries such as metallurgy, cement production, and the chemical industry. Emissions in these sectors within the EU have declined by around 50% since 2005, but a significant part of this reduction is due to lower production rather than technological improvements.

The ESC analysis points to one of the main risks related to rising production costs as “climate dumping.” This occurs when third countries, either by choice or due to lack of capacity, lag behind in implementing environmental standards, thereby maintaining lower production costs and more competitive prices. In response to this problem, the European Commission introduced the CBAM to ensure a level playing field between European and external producers by imposing a carbon tax on imports from certain carbon-intensive sectors.

With the operational phase of the CBAM starting in 2026, the ESC recommends the timely development of regulatory infrastructure and secondary national legislation, which is particularly important for the smooth functioning of the mechanism. Currently, Bulgaria lacks clearly defined responsibilities regarding its application. According to the Climate Change Mitigation Act, the competent authority is the Executive Environment Agency, but physical import and border control are carried out by the Customs Agency. The ESC analysis emphasizes the urgent need to formally define and separate the responsibilities of these two institutions.

During the ESC plenary session, Ivan Ivanov, Director of the Central Coordination Unit at the Council of Ministers, presented a draft national position on the proposed EU budget legislative package for the 2028–2032 period.