The European Union’s current climate policies risk accelerating the collapse of blast furnace-based steelmaking in the bloc, which is being hit by the combination of the Carbon Border Adjustment Mechanism (CBAM) and phase-out of free CO2 allowances, says Italian steelmakers’ association Federacciai president Antonio Gozzi.
Speaking at the association’s annual assembly on Monday monitored by Kallanish, Gozzi said that with CBAM set to take effect on 1 January 2026, the progressive reduction of free emission quotas for hard-to-abate sectors will drive up the price of CO2 allowances. Some forecasts estimate that carbon prices could ultimately reach $200/tonne, adding significant costs for energy-intensive industries and further burdening households and businesses.
“Without free CO2 allowances, all European blast furnaces are destined to close due to the unsustainable additional production costs,” Gozzi warned. This would be “an absurd outcome” given the strategic importance of blast furnace technology for producing certain high-grade steels, he added. He argued that carbon capture technologies, if adequately supported by EU incentives, could allow these plants to survive.
Gozzi also criticised “ill-conceived hydrogen steel projects” that are failing across Europe. The shift towards electric arc furnace production, which relies on ferrous scrap, will limit Europe’s ability to produce deep-drawing steel required for car body automotive production, he noted. “After 2035, the remaining European car industry will have to import steel sheet for car bodies from competitors like China, Japan, and South Korea,” he said.
He warned the next phase of the EU Emissions Trading System (ETS) could become “the final nail in the coffin” for European manufacturing if reforms are not made. “For this reason, it is necessary to urgently review the entire ETS framework, also considering its impact on energy prices … An emergency measure is needed to immediately halt the extension of the ETS/ETS2 to new sectors such as SMEs and residential buildings and to prevent the elimination of free allowances for hard-to-abate industries. We call on the Italian government to take prompt action … before it is too late,” Gozzi demanded.
Finally, he called for technological neutrality in EU climate policy. “Decarbonisation should not rely on a single technology such as electrification,” he stressed, adding that biofuels, synthetic fuels, carbon capture, and nuclear energy must all be part of a balanced approach.
Natalia Capra France
