The presentation of the EU’s low-carbon steel label – originally to be included as part of the European Commission’s upcoming Industrial Accelerator Act (IAA) – is now uncertain, McCloskey understands from sources close to the drafting process, potentially a casualty of wider frictions on the IAA’s public procurement and support provisions.
The IAA was originally scheduled for presentation in December last year, but has been postponed multiple times and is currently expected in early March.
Pursuing the Commission’s commitments under last year’s Steel and Metals Action Plan, the IAA was set to introduce the EU’s first official ‘definition’ or ‘standard’ for green steel in the form of a voluntary low-carbon label, which would then be linked to public procurement and support scheme criteria to establish domestic lead markets for low-carbon steel products and support industrial decarbonisation.
However, as demonstrated by the legislation’s significant delay, the drafting process for the IAA has been complicated by disagreements between member states, and even within the EU’s steelmaking lobby as to the scope of both the domestic and low-carbon content requirements, and the form of the voluntary label itself.
The debate on public procurement and support criteria primarily surrounds the inclusion of a “Made in Europe” mandate into the EU framework, forcing purchasers to prioritise domestic content for public projects. While strict “Made in Europe” requirements were introduced and supported by France, other states such as Germany prefer a “Made with Europe” approach, in-line with the original leak of the IAA, which would take a more relaxed approach in ‘extending’ European origin status to a club of EU trading partners.
As of the latest leaked IAA draft, public procurement and support relating to steel products would have to constitute at least 25% low-carbon material, but are not subject to a domestic content mandate or directly defined as a ‘strategic sector’ such to benefit from wider provisions. European steel association Eurofer has called for only steel “melted and poured in the EU” (or EEA countries) to quality for lead market support, else the European Commission “risks financing green steel production from abroad instead of strengthening its own industrial base.’’
As for the low-carbon label, even Europe’s steelmakers are split on the design and implementation of the EU’s first ‘green steel standard’: integrated producers generally support the inclusion of a ‘sliding scale’ mechanism, which would give greener classifications to products the lower their constituent scrap share, whereas secondary steelmakers oppose this formulation, arguing it would be unjust for their cleaner scrap-based material to be considered equivalent to high-polluting blast furnace material, especially if linked to procurement mandates.
The leaked IAA draft and its annexes allude to the inclusion of a sliding scale into the label, adjusting classification thresholds where the steel has a 20-90% scrap share, but does not otherwise define the specific scope or boundaries of the proposed label’s elements.
Secondary electric-arc furnace (EAF) producers predominantly serve the domestic construction sector, which already has sustainability obligations embedded into the Construction Product Regulation (CPR), and so EAF producers and construction consumers fear regulatory overcomplications from the introduction of a competing standard. The original leak of the IAA would also allow third-country producers to gain certification under the proposed label, potentially exposing domestic EAF steelmakers to pressure from international direct-reduced iron-fed EAF production (DRI-EAF). DRI-EAF steels could receive a better classification due to their lesser scrap content, compounded by the comparatively low emissions profile of DRI-based imports.
McCloskey understands from those close to the drafting process that Germany – with a stronger representation of integrated producers – is in favour of the sliding scale, while Italy – with more secondary production – opposed the inclusion of the mechanism. A third position, proposed by France, would reserve the sliding scale for the classification of flat steel, while maintaining existing standards for long steel markets.
According to McCloskey’s sources, the debate surrounding the label may have been one battle too many for the European Commission, now allegedly considering abandoning the standard, to be potentially revisited in the scheduled delegated act for steel products under the Ecodesign for Sustainable Products Regulation (ESPR).
Representatives from non-governmental organisations (NGOs) confirmed that they had heard rumours of the removal, and generally lamented that the label could become a casualty of complications with the content mandates, and overshadow or similarly burden the subsequent implementation of the ESPR.
German steel association WV Stahl declined to comment on the potential removal of the label from the scope of the IAA, instead directing McCloskey to a press statement 27 February calling for “the mandatory linking of sustainability requirements with ‘Made in EU’ criteria” as part of the IAA”, as per “commitments made in the [Steel and Metals Action Plan].”
Giving some insight into the debates guiding the Commission’s Committee on Industry, Research and Energy, WV Stahl “warns against mixing up different political instruments.”
“Regulatory projects that are already advanced—such as the ongoing negotiations on a post-safeguard instrument—should not be used as an argument against binding “Made in EU” criteria within the framework of the IAA,” said the association.
WV Stahl supports limiting “Made in EU” status to member states and European Free Trade Association (EFTA) countries, in-line with Eurofer’s recommendation.
The European Commission was approached for comment, but did not respond by time of publication.
