As Brussels seeks to secure its transatlantic trade relations, the continent’s leading steel producers are calling for a reform of the European Union Emissions Trading Scheme (EU ETS) in order to safeguard their competitiveness.
Faced with the need to drastically reduce its carbon emissions whilst contending with ever more aggressive international competition, the steel industry once again epitomises Europe’s contradictions.
Two separate cases highlight this. On the one hand, the European Parliament has given the green light to the implementation of the tariff commitments agreed between the European Union and the United States under the Turnberry Agreement.
On the other hand, ArcelorMittal, Thyssenkrupp Steel and Voestalpine – which together account for nearly 60% of integrated steel production in Europe – are calling for a reform of the European Union Emissions Trading Scheme (EU ETS). Despite their different natures, these two initiatives share a common concern: to preserve European production capacity against a backdrop of profound transformation in the global economy.
Europe is strengthening its trade safeguards
The agreement reached with Washington aims to ease several years of trade tensions and provide greater certainty for businesses on both sides of the Atlantic. However, Brussels was not prepared to open up its market without receiving something in return. The texts adopted include, in particular, safeguard mechanisms enabling the EU to respond in the event of a significant trade imbalance. They also introduce clauses suspending tariff preferences should the United States maintain certain customs barriers on products derived from European steel and aluminium.
For the European institutions, the challenge is clear: to promote trade whilst ensuring that European industry is not undermined by asymmetrical trade practices. This approach is part of a broader shift in European economic policy. In the face of the resurgence of industrial policies in the United States and China, competitiveness has once again become a strategic priority in Brussels.
Decarbonisation at the right pace
It is precisely on this issue of competitiveness that the major European steelmakers have chosen to raise their concerns with European decision-makers. In their joint statement, ArcelorMittal, Thyssenkrupp Steel and Voestalpine do not dispute the EU’s climate targets. All have made significant investments in production technologies that emit less CO2. Their concern relates more to the gap between regulatory ambitions and industrial realities.
With green hydrogen still being expensive, electricity prices among the highest in the world and inadequate carbon capture infrastructure, the conditions for competitive decarbonisation have not yet been met for these three steelmakers. As the cost of carbon continues to rise, these three companies fear that this situation will put European producers at a disadvantage compared with competitors subject to less stringent constraints. This brings with it all the associated risks in terms of industrial sovereignty.
They are therefore calling for a temporary suspension of the increase in ETS costs – with prices remaining at current levels until the key drivers of economically viable decarbonisation are in place – support for businesses embarking on decarbonisation, and border measures to ensure a level playing field in international competition.
Behind these two issues lies a more fundamental question: what role does Europe still wish to play in the global industry of the future?
