In its ETS position published today, the European Steel Association (EUROFER) estimates that today’s carbon costs for conventional blast-furnace steel could roughly double to around €100 per tonne by 2030 and above €200 per tonne as of 2031, making it economically unviable. It is therefore calling for a fair and pragmatic transition to the EU’s Carbon Border Adjustment Mechanism (CBAM) that supports steelmakers across Europe.

Under the ETS, European steelmakers pay for their carbon emissions but receive benchmark-based free allowances that provide partial protection against competitors that do not face comparable carbon costs. These allowances are being withdrawn as CBAM introduces a carbon price on imports. EUROFER is calling for a smoother transition between the two systems over the next five years, so that carbon pricing, carbon leakage protection and investment conditions move forward together.

Significant gaps also remain for exports. Foreign producers face the EU carbon cost only on products they sell into the EU, while European producers bear carbon costs regardless of where their products are sold. Yet the EU still lacks an effective structural solution to protect European steel exports and steel-intensive downstream sectors against carbon leakage on global markets.

Axel Eggert, EUROFER’s Director General, said: “Europe’s steel industry is investing billions in the transition and is committed to EU climate neutrality by 2050. 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. We need an ETS that rewards first movers while supporting the whole industry through the transformation. Withdrawing carbon leakage protection too quickly risks undermining the very investments needed to decarbonise. The objective is clear: climate-neutral steel made in Europe.”

EUROFER says carbon pricing and effective carbon leakage protection must go hand in hand. Under the EU’s proposed timetable, benchmark-based free allocation would decline sharply by 2030, outpacing the expected development of the conditions needed for industrial decarbonisation. EUROFER proposes a slower phase-out of free allowances over the next five years, followed by a faster phase-out once these conditions are in place. This would smooth the transition to CBAM while maintaining effective carbon leakage protection for European steel, downstream value chains and exports.

Carbon pricing alone cannot deliver the transformation. Low-carbon investment also requires competitive low-carbon energy, effective trade and carbon leakage protection, lead markets for low-carbon steel, access to ferrous scrap, and adequate investment support.

These enabling conditions will not be available everywhere in Europe at the same time. The transition therefore requires solidarity across Member States, regions and industry. Mr Eggert commented, “Solidarity must be a guiding principle of the transition and the ETS review. Europe needs an ETS that supports first movers without leaving behind companies and regions where the infrastructure and investment conditions are not yet available. That is how we make climate neutrality an industrial success across Europe.”