A new discussion paper published by the Europe Jacques Delors institute offers a comprehensive analysis of the external dimensions of the European Union’s Steel and Metals Action Plan (SMAP).
While much of the recent industry dialogue has focused on the Carbon Border Adjustment Mechanism (CBAM), this paper, titled “The Bigger Picture: Global implications of the EU’s steel strategy beyond CBAM,” argues that the EU is creating a complex web of cumulative regulations. The authors suggest that without careful alignment, these measures could inadvertently create a “green spaghetti bowl” of regulation that complicates international trade and potentially disincentivizes decarbonization efforts abroad.
The document analyzes four key pillars of the EU strategy and their potential cross-cutting impacts on the global steel market.
1. Preventing carbon leakage (CBAM)
The paper notes that as free allowances are phased out between 2026 and 2034, CBAM will pose significant challenges to trading partners. The authors highlight specific risks for Small and Medium Enterprises (SMEs). Due to a lack of capacity to monitor and verify emissions (MRV), SMEs may be forced to rely on “default values”. The paper warns that without support, these values could act as a structural penalty, increasing costs regardless of the firm’s actual carbon efficiency.
2. Creating lead markets (Low-Carbon Label)
The EU intends to introduce a voluntary “low-carbon steel” label to help justify green premiums. However, the analysis warns that this voluntary standard could become a de facto market access barrier if widely adopted. The authors point out potential conflicts in definitions; for example, if the EU definition differs from those of trading partners (such as relying on absolute emissions versus a scrap-based sliding scale), it could exclude foreign producers from the green segment of the EU market.
3. Promoting circularity (ESPR & Scrap Restrictions)
The paper examines the external impact of the Ecodesign for Sustainable Products Regulation (ESPR), which introduces mandatory requirements for durability, recycled content, and a Digital Product Passport (DPP).
Compliance Costs: These requirements create high compliance costs and require digital infrastructure that many exporters may lack.
Scrap Exports: The document also discusses the EU’s move to restrict scrap exports to non-OECD countries. The authors argue this could negatively impact trading partners like Turkey and India, who rely on imported EU scrap to lower their own emissions intensities.
4. Trade defense and the New Safeguard
With the current steel safeguard measure expiring in June 2026, the Commission has proposed a permanent safeguard measure.
The paper details the proposal’s significant features:
- A 47% reduction in import quotas.
- A 50% tariff on out-of-quota imports.
- “Melt and Pour” requirements to strictly trace the origin of steel and prevent circumvention.
The cumulative challenge: a “Green Spaghetti Bowl”
The authors emphasize that these measures create a “triple regulatory challenge” where steel products may face CBAM carbon costs, ESPR compliance costs, and safeguard tariffs simultaneously.
The paper warns of misaligned objectives: if a foreign producer invests in green steel but still faces a 50% safeguard tariff or cannot access necessary scrap from the EU, the economic incentive to decarbonize is diminished. The authors argue that the threat of high tariffs may eclipse the potential benefits of a “green premium”.
To mitigate negative spillovers, the Europe Jacques Delors paper recommends a “steel-centric” engagement approach rather than discussing regulations in isolation. The authors suggest establishing dedicated task forces to address the cumulative impact of these measures and ensuring that trade defense instruments do not inadvertently block the import of low-carbon steel.
Europe Jacques Delors implications of EU Steel strategy beyond CBAM
