An alliance of European industrial companies, including steelmakers voestalpine and Thyssenkrupp, have called on European Commission President Ursula von der Leyen to intensify, and delay the phase-out of domestic protections to the EU’s carbon reduction framework, according to a joint letter by alliance members.
The letter describes the “deep concern” of its signatories, representing companies across the EU’s industrial supply chains, “regarding the transformation and competitiveness of the energy-intensive industry,” and existential threats to both “the economic viability of this transformation” – and domestic industry itself.
Specifically, the alliance calls for a suspension to the currently scheduled phase-out of free allocations under the Emissions Trading System (ETS) and the Carbon Border Adjustment Mechanism (CBAM), a freezing of current ETS benchmarks, and greater availability of electricity price compensations for energy-intensive production – aiming to influence a meeting of the European Council and its discussions surrounding the compatibility of the EU’s climate objectives and its industrial competitiveness, scheduled for 23 October.
Without these amendments to the EU’s current climate protection framework, the group warns of additional carbon costs that could “exceed operational cash flow and profit,” and cause further carbon leakage across the energy-intensive value-chain; risking jobs, industrial competitiveness, and undermining climate change mitigation.
“Transformation must not lead to deindustrialization – it must be designed to be economically viable and technologically realistic,” says the letter. “The success of the transformation, achieved through a maximally supportive and realistic political framework, is therefore in the common interest of employers and employees alike.”
The letter stresses that European industry is “committed to ambitious climate protection,” and is “not only ready but already in the process of making its contribution […] through substantial investments,” but lacks “a shared conviction that industrial and climate policy do not exclude each other but depend on one another.”
The alliance also states that fundamentals to accommodate Europe’s industrial transition – such as green hydrogen and affordable clean electricity – are also lagging behind schedule, and global competitors are not matching the EU’s ambitions, creating an unfair playing field if regulatory developments proceed as planned. Geopolitical factors like this year’s tariff offensives from the United States, and positioning against China’s exporting industries, are also threatening European competitiveness.
The EU’s climate protection framework is largely centered around the ETS, which charges polluters for their carbon emissions by requiring them to secure European Union Allowances (EUAs) via auction. Energy-intensive producers, including the steel sector, receive free EUA allocations to protect their global competitiveness and avoid the relocation of these industries to third countries, but from 2026 these free allowances will begin to decrease, alongside a correlative phase-in of carbon cost liabilities on imports under CBAM.
The European Commission has recently proposed significant new trade protections for its primary steelmakers, but downstream steel-consuming manufacturing sectors remain relatively unprotected by both existing and proposed trade barriers to low-cost imports, and CBAM’s carbon leakage defenses.
Other industry groups such as those among the EU’s downstream steel associations have argued that trade and climate protection measures should be preserved, but extended downstream, while voestalpine and Thyssenkrupp’s industrial alliance calls for an effective suspension of relevant measures, alongside further subsidisation.
Steelmakers like ArcelorMittal and Salzgitter have already announced postponements to their planned decarbonisation projects, while others are proceeding with the assistance of public funds, though private financing is demonstrating new frictions.
It is unlikely that the European Council will agree to recommend delays to the fiscal implementation of CBAM from January, or a suspension to the ETS’s wind-down of free allocations, as these measures are enshrined in EU law and intrinsically linked to established policies like the EU’s climate targets 2030-2050, its positioning as a climate leader globally, and the EU budget.
The European Commission has already denied delays to CBAM, and has completed consultations on extending the measure to downstream imports. Collected ETS revenues are also allocated to industrial decarbonisation initiatives via the Innovation Fund, indicating the Commission’s preferred strategy is to expand or simplify protections to cover unintended impacts of its climate and trade policies, rather than reverse or delay them substantively.
However, there are increasing frictions between the EU’s climate goals and its national executives, on issues such as the EU’s 2040 climate target – by which point both ETS EUAs and free allowances would be extinguished under current rules – and its parameters, and potential export exemptions under the ETS and CBAM for domestic producers.
The Commission seems more adamant that the EU lead by example with its ETS and CBAM, reportedly looking to stimulate carbon pricing globally ahead of November’s Conference of the Parties (COP) in Brazil (via CBAM rebates for carbon prices already paid in equivalent ETS frameworks), and scheduling regulatory proposals to better clarify and review the CBAM/ETS by the end of the year or early next year.
Industrial critics of the Commission’s climate policies – such as this latest industrial alliance – highlight a disconnect between lofty climate ambition and geopolitical realities, as exemplified by last week’s collapse of the adoption of the International Maritime Organization’s (IMO) Net-Zero Framework, which saw talks postponed for one year after pressure from US representatives and threats of retaliatory tariffs.
Benjamin Steven Journalist, Steel
