Rising carbon costs seen hurting EU export competitiveness

The continued increase in Emissions Trading System (ETS) costs for European steelmakers is raising further concerns over the future of European steel exports in the coming years.

In a webinar organised this week by Euractiv, Axel Eggert, director general of Eurofer, said current plans to phase out ETS free allocations as the market prepares for the implementation of a Carbon Border Adjustment Mechanism (CBAM) could significantly hamper European steel exports.

“European steelmakers export some 20 million tonnes of steel every year; we need to make sure we are not losing these exports going forward,” he warned at the meeting attended by Kallanish. The steel sector is already suffering from a shortage and high costs of ETS carbon permits, he continued, adding that phasing out free allocations by 2023 will increase the pressure further.

Eggert noted that a significant reduction of exports could lead to increasing oversupply of steel within Europe and the need to reduce output and close capacities.

Members of the European Parliament participating on the same Euractiv panel confirmed that risks exist for European exports and that a solution needs to be found to secure the competitiveness of European exporters in the global market.

ETS prices have in February surpassed the level of €95/tonne ($109). In February 2021, prices stood at €38-40/t. The European Commission plans to gradually phase out ETS free allocations as CBAM is implemented during 2023-2035. The phaseout of free allocations is worrying European steelmakers.

Emma Wiesner, Member of the European Parliament, nevertheless stressed that if the free allocation phaseout is slowed down or stopped, there is a risk of not rewarding the frontrunners in the current transition towards carbon-free industrial production and steelmaking.

Emanuele Norsa Italy