Europe’s top steelmakers warn against weakening carbon market

The European Union’s biggest steelmakers, including Salzgitter AG and SSAB AB, urged policy makers to avoid weakening the bloc’s flagship emissions market and to support strengthening its carbon border levy.

Dampening the EU Emissions Trading System would erode investment certainty, penalize companies that decarbonize faster and delay the industry’s transition of to clean energy, the steelmakers said in a statement on Tuesday.

The warning — which was also endorsed by Outokumpu Oyj, Saarstahl AG, Dillinger and SHS — comes two weeks before a key reform of the so-called EU ETS 1, which some governments and companies criticize for boosting Europe’s stubbornly high carbon prices and hurting competitiveness.

“The primary pressure on competitiveness comes from high electricity costs due to fossil fuel dependencies, infrastructure gaps and global steel overcapacity, not from carbon prices,” the steelmakers said.

The carbon market review is set to be unveiled by European Commission on July 15 to adjust the ETS to a new 2040 climate goal of reducing emissions by 90% from 1990 levels.

For the steel companies, the reform should preserve the carbon price signal by keeping the pace of annual emission reduction in the system at 4.4% to at least 2035 and avoiding measures to artificially increase the supply of allowances.

They also want the EU to maintain the trajectory for phasing out free allowances when gradually introducing the Carbon Border Adjustment Mechanism, which is meant to ensure a level playing field for local producers against rivals from countries with weaker climate policies.

“A strong ETS1 combined with a robust and fully implemented CBAM can reinforce Europe’s competitiveness, resilience and industrial renewal,” the steelmakers said. “To make this transition investable, revenues must be channeled back into industrial decarbonization, with a particular focus on CBAM sectors.”

(By Ewa Krukowska)