Eurofer warns against ending carbon free allocations

Eurofer issued a note last week to warn of the risks the European steel industry would face if carbon free allocations were to be phased out in the near future.

The European Parliament’s environment committee voted in favour of a Carbon Border Adjustment Mechanism (CBAM). This is likely to lead to a measure to encourage other countries to implement their rules on decarbonisation. In parallel with this border adjustment, though, there is a proposal to rapidly phase out free allocations.

“At today’s carbon price of €38/tonne of CO2, production costs of EU primary steel would increase by around €75/t,” Eurofer notes. “This would have a disruptive impact on the EU steel industry and the related value chains, as it would expose EU steel producers and downstream sectors to such high costs, undermining the financial ability to invest in low carbon technologies and jeopardising the competitiveness of 20 million EU exports to third countries.”

In the note seen by Kallanish, the association notes that cancelling free allocations would be a “…death sentence” for the European steel sector. “We urge the parliament to rethink this during the plenary stage, as CBAM is not a substitute for free allocation under the EU ETS – it is a necessary complement,” it observes.

“The European steel industry is committed to contributing to the EU’s climate and energy goals and European companies have been launching several projects to reduce emissions deeply. Yet, the successful implementation of such projects requires a comprehensive and supportive regulatory framework, including funding support, access to low carbon energy sources at internationally competitive prices and de-risking instruments such as contracts for difference,” Eurofer concludes.