Eurofer calls for ETS reform to support European steel decarbonization

The European Steel Association (Eurofer) is calling for changes to the EU Emissions Trading System (ETS), arguing that the framework needs to better reflect current market conditions if Europe is to combine industrial competitiveness with its 2050 climate targets.

Ahead of the European Commission's review of the ETS, Eurofer reiterated its support for climate neutrality but warned that carbon pricing alone would not provide the conditions needed for the steel industry's transformation.

Low-carbon steel projects face delays

According to Eurofer, European steelmakers have taken investment decisions covering around 35 million tonnes of new low-carbon steelmaking capacity by 2033. However, the association estimates that projects representing between 10 million and 15 million tonnes of capacity have already been delayed or put on hold as their economic viability has deteriorated.

Eurofer points in particular to high electricity prices, limited availability of renewable hydrogen and insufficient access to ferrous scrap. It argues that electricity prices of around €50/MWh and substantially cheaper renewable hydrogen will be necessary to make low-carbon steel production internationally competitive.

"The European steel industry is ready for deep decarbonisation, but the EU and most Member States are not," Eurofer Director General Axel Eggert said. "Without affordable clean electricity, hydrogen infrastructure and greater scrap access, the transition cannot happen at the pace envisaged."

Eurofer seeks slower phase-out of free allowances

A central demand concerns the planned reduction of free ETS allowances as the Carbon Border Adjustment Mechanism (CBAM) is phased in. Eurofer is calling for the phase-out of free allocation for CBAM sectors to be significantly slowed from 2028, particularly through 2030-32.

The association also wants the existing methodology for the hot metal benchmark to remain in place beyond 2030. According to Eurofer, this would provide greater investment certainty and support technologies such as hydrogen-ready direct reduced iron (DRI).

Another priority is a structural solution for exports. Eurofer argues that European steelmakers and downstream industries need protection against carbon leakage when competing in international markets where producers do not face equivalent carbon costs.

More ETS revenues sought for industrial investment

Eurofer is also urging governments to direct a larger proportion of revenues generated through ETS allowance auctions towards industrial decarbonization.

"According to the European Commission's own figures, less than 5% of ETS auction revenues managed by Member States are invested in industrial decarbonisation," Eggert said. "If Europe wants to accelerate the transition, more of these revenues must be channelled back into the sectors making the investments."

The association argues that the recently introduced European Steel and Metals Action Plan provides a basis for improving investment conditions but needs to be fully implemented.

"The ETS must continue to reward companies investing in decarbonisation while ensuring Europe remains an attractive place to manufacture," Eggert said, warning that without changes the system could ultimately reduce European emissions through declining industrial production rather than technological transformation.

Source and Photo: Eurofer