EU steelmaker executives warn of ‘premature’ CBAM transition

An array of top EU steelmaker executives have put their names to an open letter warning the European Commission to avoid a “premature” transition from free carbon emissions allocations to the untested Carbon Border Adjustment Mechanism (CBAM).

The proposed acceleration of this transition would weaken carbon leakage protection, favouring international competitors which are not subject to equivalent carbon costs. “In Europe, new allocation rules will suddenly reduce the main CO2 benchmark by around 40% – because of one plant that was previously not in the scope – and set a value which no company can achieve in just three years,” the letter states. “Circumvention and resource shuffling are only a few of the many risks that could undermine the CBAM’s effectiveness.”

Moreover, CBAM does not yet foresee any measure to preserve the EU’s 20 million tonnes/year of steel exports, worth €45 billion ($48 billion), and the 30,000 jobs that are directly dependent on these, the executives point out in the letter sent to Kallanish.

“The proposals also remove massive allowances from the market, further driving the carbon and electricity price in Europe at a time when businesses and households are struggling with skyrocketing energy costs and inflation. Finally, they fail to capture the much higher carbon footprint of stainless steel imports derived from the embedded alloying elements,” the letter continues.

The executives call on the European Parliament and Council to avoid further scaling back of existing carbon leakage protection until CBAM has proven its effectiveness and a solution for exports is in place. They also want to prevent a sharp decrease in free allocation for existing steel plants which would result from a modification of the benchmark scope. Instead, low carbon technologies must be rewarded without prematurely reducing benchmark values, at least in the first years when such technologies are introduced at an industrial scale, the executives conclude.

Among the names to sign the letter are Geert Van Poelvoorde, CEO, ArcelorMittal Europe; Bernhard Osburg, CEO, thyssenkrupp Steel Europe AG; Henrik Adam, Chairman of the Board, Tata Steel Netherlands Holding; Francesc Rubiralta Rubio, Chairman and CEO, CELSA Group; and Olavi Huhtala, CEO, SSAB Europe.

Adam Smith Germany