EUROFER warns EU steel carbon costs could more than double by 2031

Europe’s steel industry could see its annual carbon costs rise from around €3.4 billion in 2026 to €8.2 billion in 2031, despite investments in lower-emission steelmaking, according to the European Steel Association EUROFER.

In a new position paper on the revision of the EU Emissions Trading System (ETS), EUROFER estimates that carbon costs for conventional blast-furnace steel could reach around €100 per tonne by 2030 and exceed €200 per tonne from 2031. The association argues that costs at this level would make conventional production economically unviable.

Under the ETS, European steelmakers pay for their emissions while receiving benchmark-based free allowances to limit carbon leakage. These allowances are being phased out as the Carbon Border Adjustment Mechanism (CBAM) introduces carbon costs on imports.

EUROFER calls for slower phase-out

EUROFER is calling for a smoother transition between free ETS allocation and CBAM over the next five years. It proposes a slower initial reduction in free allowances, followed by a faster phase-out once the energy, infrastructure and market conditions required for industrial decarbonisation are more widely available.

The association also points to continued carbon-leakage risks for exports. Non-EU producers face European carbon costs only on products sold into the EU, while European steelmakers incur ETS costs regardless of where their steel is sold.

“Investment decisions have been taken for around 35 million tonnes of low-carbon steel projects, but projects for more than 10 million tonnes of steel capacity have stalled as the business case has deteriorated,” said EUROFER Director General Axel Eggert.

EUROFER argues that carbon pricing alone will not be sufficient to transform the sector. Competitive low-carbon energy, trade and carbon-leakage protection, lead markets for low-carbon steel, access to ferrous scrap and investment support will also be required.

The association said the revised ETS should support early investments in decarbonisation without disadvantaging steelmakers in regions where the necessary energy infrastructure and investment conditions are developing more slowly.

Source: Eurofer, Photo: Fotolia