EU Parliament backs incentives for low-carbon steel in car production

A compromise proposal in the European Parliament would allow carmakers to count the use of low-carbon steel produced in the EU towards their vehicle CO₂ reduction targets. The European Steel Association (EUROFER) has welcomed the initiative, arguing that it could stimulate demand for low-emission steel and support investment in European steelmaking.

The agreement, reached by the European People's Party, Socialists and Democrats, and Renew Europe groups, proposes an 87.5% reduction in vehicle CO₂ emissions by 2035 compared with 2021 levels.

Under the proposal, qualifying low-carbon steel produced in the EU could contribute up to a further 7.5 percentage points towards compliance with the emissions requirements.

Steel credits to support industrial decarbonisation

EUROFER considers the proposed credit mechanism an important step towards establishing a market for low-carbon steel in the automotive industry.

More than 60 major steel decarbonisation projects are currently planned or underway across Europe. According to the association, these projects could provide over 20 million tonnes of additional low-carbon automotive steel production capacity by 2030, potentially enough to supply all vehicles registered annually in the EU.

“Europe's steelmakers are investing to produce low-carbon steel but what is the point of transforming our plants if there is no market for the steel they produce?” said EUROFER Director-General Axel Eggert.

The association argues that dedicated incentives would help convert demand from automotive manufacturers into investment in lower-emission steel production.

Automotive industry represents key market for steel

Steel accounts for approximately 800 kg, or 40-50%, of a typical vehicle's weight, according to EUROFER. Iron and steel production is also responsible for an estimated 16-27% of emissions associated with vehicle manufacturing.

Using low-carbon steel could therefore reduce emissions generated during vehicle production, complementing measures aimed at reducing emissions during vehicle operation.

EUROFER is calling for the proposed credit to remain specifically dedicated to low-carbon steel rather than being extended to other low-emission materials. The association argues that separate incentives could support alternative materials without weakening demand for decarbonised steel.

Made in EU requirement aims to support domestic production

The parliamentary compromise includes a requirement that qualifying low-carbon steel must be melted and poured within the EU.

According to EUROFER, this provision would ensure that the incentives benefit European steel production rather than imported steel that undergoes only further processing within the bloc.

The European Parliament is expected to vote on the proposal later in 2026, before negotiations with the European Commission and the Council.

EUROFER is urging policymakers to retain both the dedicated low-carbon steel credit and the Made in EU requirement in the final legislation.

The proposed mechanism could provide an additional incentive for European steelmakers to invest in lower-emission production technologies, although its eventual impact will depend on the final regulatory framework and its implementation.

Source: EUROFER, Photo: Fotolia