A new, nearly 400-page report from former ECB president Mario Draghi outlining steps to revive EU economic competitiveness should be integrated into the upcoming Clean Industrial Deal and urgently implemented, says European steelmakers association Eurofer. The report says the EU faces “slow agony” unless it catches up with competitors.
The report, which aims to boost EU investment by €800 billion ($881.7 billion) per year, recognises a number of steel-relevant issues.
The phasing out of free allowances and the replacement of the current Emissions Trading System (ETS) with the Carbon Border Adjustment Mechanism (CBAM) entail high delocalisation risks. Additional fixes are needed to make CBAM effective, coupled with close monitoring to avoid circumvention and resource shuffling, a solution for EU exports and the extension of CBAM to downstream sectors, Eurofer says in a note sent to Kallanish.
Despite the growing share of renewables in the grid, households and businesses do not yet benefit from low energy prices, it continues. The European steel industry expects urgent measures that lead to this objective in the short term.
“There are insufficient financial incentives and resources for the industrial transition, as the EU Innovation Fund alone is not enough, while only a fraction of ETS revenues is currently invested in the decarbonisation of energy-intensive sectors such as steel,” Eurofer points out. Support is needed for both capital and operational expenditure via the earmarking of ETS allowances. The Hydrogen Bank and Carbon Contracts for Difference should also be used to support the transition.
The introduction of a minimum quota in public procurement and auctions for locally produced clean tech products and components is strongly recommended.
Moreover, the EU should maintain a flexible trade defence policy to react quickly to market distortions while also working on structural solutions.
“Economic growth in Europe has been weak compared to the US and China for a long time, but the sense of urgency around economic reform outside of crises was lacking,” ING Bank says of Draghi’’s report. “In recent years, the global context around the economy has changed. The energy crisis, increased global competition and geopolitical risks have exposed threats to the European economic model, resulting in a louder wake-up call for change.”
“Getting political support for the proposed plans will be the biggest challenge in the current political climate. The European parliamentary elections already indicated that the political mood in Europe is rather shifting to less Europe instead of more Europe,” ING warns.
Adam Smith Poland
