ETS reforms fall short of requirements: UK Steel

UK Steel says the government’s UK Emissions Trading Scheme (ETS) reforms announced on Monday contain gaps that need to be addressed for the steel industry to successfully meet decarbonisation targets.

Emissions caps have been tightened for the UK’s power and industrial sectors. To ease the transition, the cap will be set at the highest level of the range consulted on, in line with net zero – allowing maximum flexibility for industries, a government note says. Extra allowances will also be made available to the market between 2024 and 2027, while the current levels of free allocation of allowances for industry has also been guaranteed until 2026, to continue to protect them from international pressures.

The UK ETS will be extended to cover more sectors – domestic maritime transport from 2026 and waste from 2028. This will be during the rolling out of a phased removal of free carbon allowances for the aviation industry in 2026 and supporting investment in new Greenhouse Gas Removal technologies.

“With 2026 less than three years away, and with only nine years to decarbonise the steel industry according to the Climate Change Committee, the lack of detail, strategy and financial long-term leadership leaves steelmakers in the dark,” UK Steel says in a note sent to Kallanish.

“Without a hawk-like vision, a carefully planned capital expenditure and a powerful decarbonisation strategy, we could simply close down steel plants and de-industrialise the nation,” says UK Steel director general Gareth Stace. “There are huge question marks over if Government really wants to sustain steel, the backbone of British manufacturing, or just leave it to shrink and rely on other nations’ supply.”

“We are committed to decarbonising by 2035 if the right business environment is created, and ETS free allowance, the level of the cap and a CBAM will help this,” Stace continues. “Yet Government is plainly taking with one hand and not giving back with the other when it issues one-off policies without a strategic plan for capital expenditure and aligning ETS regulations with CBAM implementation.”

Adam Smith Poland