European carbon prices slide as Germany’s Merz says EU ETS may need revamping
European carbon prices were trading near six-month lows on Feb. 12 after German Chancellor Friedrich Merz said the EU’s Emissions Trading System should be revised or postponed if it undermines industrial competitiveness, comments that could reshape debate at an EU leaders’ summit.
EU Allowances stood at Eur73.01/mtCO2e ($86.75mtCO2e) at 1207 GMT on Feb. 12, the lowest since Aug. 14, according to Intercontinental Exchange data.
EUAs have slumped by almost Eur20/mtCO2e since Jan. 15 amid news that the European Commission is looking to reform the EU ETS, with changes expected around free allocations and allowance supply caps.
“This system [EU ETS] is not the system to generate new revenues. This system is implemented to reduce CO2 emissions and, at the same time, to enable the companies to come to CO2-free production lines,” Merz said at the European Industry Summit in Antwerp late Feb. 11. “If this is not achievable and if this is not the right instrument, we should be very open to revise it or at least to postpone it as we did with EU ETS2.”
Other European leaders have adopted a similar stance on reforming the bloc’s carbon market.
On Feb. 12, ahead of the EU summit, Czech Prime Minister Andrej Babis said EU Allowances were “destroying our industry” and called for a revision of the ETS, arguing that carbon prices should be capped at Eur30/mtCO2e to save European industry.
High carbon and energy costs
Merz acknowledged that the EU was discussing this matter seriously and assured the industry that steps would be taken to address their concerns.
“The elephant in the room is the EU ETS question, but note that we are talking about it in the EU Council,” Merz said. “We had some very strong comments from colleagues in the east but also from the western parts of the EU.”
Merz’s intervention comes as European manufacturers face mounting pressure from high energy costs and carbon prices that exceeded Eur90/mtCO2e in mid-January.
The comments suggest growing political willingness to reconsider the pace of EU climate policy implementation if it threatens industrial output and jobs.
The summit will see EU leaders discuss “European competitiveness in a changing geoeconomic context,” according to the meeting’s agenda.
Merz’s comments follow European Commission President Ursula von der Leyen’s defense of the EU ETS at the same event, in which she said she would push member states to reinvest more of the revenues from carbon permit auctions into industrial decarbonization.
The European Commission has already scheduled an ETS review for the third quarter of 2026, with many governments pushing for greater price predictability through extended free allocations or changes to allowance caps.
The sharp fall in EUAs reflects growing pushback against the expected increase in carbon prices, with an expanding political coalition keen to revisit carbon market rules to ensure prices remain manageable for industry, according to Coralie Laurencin, director of European gas, power, and carbon policy at S&P Global Energy CERA.
“The discussion will take many months to find a landing zone, but many are in favor of a less tight carbon market and lower prices,” said Laurencin. “This is no longer just some countries ranting; this is Europe’s industrial heartland that wants significant change.”
The times of open markets ‘are over’: Friedrich Merz
The times of open markets and fair competition “are over”, with domestic manufacturers now needing to be given preference, German Chancellor Friedrich Merz proclaimed emphatically last week.
A key discussion topic in recent weeks has been the idea of introducing a “Buy European” mandate for steel procurement in the EU.
Speaking after the “steel dialogue” attended by multiple industry stakeholders at the German Chancellery in Berlin on Thursday, Merz said: “We have been asked to ensure that European and German steel are given preference in procurement. Yes, I agree.”
“This is somewhat different from what we always considered right in the past, when we had open markets, fair competition, and certainly not these tariffs like the ones now being levied in America. Those times are unfortunately over, and that’s why we must protect our markets, why we must protect our manufacturers, and why we must also grant our manufacturers a corresponding preference when it comes to the use of steel in Germany and Europe,” he continued.
Merz went on to thank Deutsche Bahn for agreeing to procure low-emission rail. The rail network operator has entered a pilot project to procure the rail from Saarstahl’s France-based Rail unit, with the first 1,000 tonnes delivered.
“This is the path we want to take together,” Merz commented.
The Chancellor also highlighted the “human and emotional perspective” of the steel dialogue. “We are not talking about abstract economic figures here, but about the fate of a key industry. We are talking about the fate of entrepreneurs, employees, and their families who are counting on and hoping that politicians will commit to preserving these jobs and that German steel will be protected,” he concluded.
The dialogue emphasised the importance of competitive energy prices (see Kallanish passim). The German government said it plans electricity price compensation to provide additional relief for the steel industry through an increase in aid intensity. It also wants to end exemptions from sanctions for semi-finished steel imports from Russia. It supports efforts to negotiate a quota arrangement with the US, advocates CBAM’s extension to downstream steel products and calls for a WTO-compliant export compensation.
Adam Smith Austria
German ‘steel dialogue’ highlights competitive electricity supply importance
The German government will lobby the European Commission for measures to support the German steel industry, as its existence is under threat, while competitive electricity supply remains critical, German Chancellor Friedrich Merz said after the “c” he hosted in Berlin on Thursday.
“The European Commission’s [EC] recent proposals for effective protection of the steel industry are a step in the right direction,” he said. Meanwhile, “without a significant reduction in energy costs, this [steel] industry in Germany would not be able to survive.”
“Politicians must do everything in their power to preserve the industry,” he continued, adding that local manufacturers should be protected and their transformation to climate-neutral production supported.
The German government has already implemented steel industry support measures. These include the abolition of the gas storage levy, the reduction of electricity tax to the EU minimum and the reduction of transmission grid charges, by €6.5 billion ($7.5 billion) in 2026 alone, the government notes.
It is also lobbying the European Commission for further relief in order to maintain the competitiveness of the steel industry and keep it on its path towards climate neutrality. Specifically, the so-called electricity price compensation is to be expanded and an industrial electricity price is to be implemented, Kallanish notes.
In contrast to the industrial electricity price, the electricity price compensation would provide additional relief for the steel industry through an increase in the aid intensity expressly demanded by the German government.
The government meanwhile continues to work intensively to end exemptions from sanctions for semi-finished steel imports from Russia, with plans to rigorously prosecute any attempts at circumvention.
German finance minister Lars Klingbeil said: “We must continue to reduce energy costs and improve the conditions of competition and give a clear European response to global overcapacity and dumping prices. We want a clear focus on climate-friendly quality steel from Germany and Europe. For our infrastructure and defence, in the automotive industry and in other important areas, we want domestic and European steel to be used as a priority.”
The steel dialogue participants agreed consistent measures are needed to address the negative effects of global overcapacity and the threat of trade diversion to the EU market. “To this end, the EU must exhaust its trade policy possibilities. What is needed is a robust, balanced successor to the safeguards that expires on 30 June 2026 that complies with WTO law,” the government notes.
In addition, it supports the EC’s efforts to negotiate easing US tariffs on steel and aluminium, including derivatives, so that European goods can be exported to the USA using duty-free quotas.
The German government advocates CBAM’s extension to downstream steel products and calls on the Commission to present a model for WTO-compliant export compensation in the near future. Should effective carbon leakage protection via CBAM or compensation payments prove unsuccessful, competitiveness should continue to be regulated through the free allocation of allowances, it adds.
The German Steel Association – WV Stahl – meanwhile called on politicians to act quickly. “There should be no more time lost and at least lower industrial electricity prices should be introduced as quickly as possible,” it urges.
WV Stahl is seeking fair competition instead of market distortion, and has called on the government to lobby Brussels to introduce robust trade protection against price dumping and overcapacity as quickly as possible.
“Competitive energy prices require a permanent reduction of network charges, continuation and deepening of electricity price compensation, and in the medium term, the introduction of a reliable industrial electricity price to keep investments in the country,” the association says.
Svetoslav Abrossimov Bulgaria
Friedrich Merz to call steel summit
German chancellor Friedrich Merz says he will schedule summits for the steel and automotive industries, which are both suffering from economic recession.
His announcement last week was in reaction to requests from numerous mills that have expressed the need for a high level meeting of industry with policymakers.
“I will very soon invite steelmaking companies as well as unions and [governments of] the states with steel production,” he said in a televised address. The aim is to retain a steel industry in Germany, he added.
The move has been welcomed by steel federation Wirtschaftsvereinigung Stahl. “Steel is not only the backbone of virtually all value chains, but also a cornerstone of our democracy and freedom,” says managing director Kerstin Maria Rippel.
In a statement sent to Kallanish upon request, she underlines that Europe’s future defence capabilities, competitive strength, and economic stability are at stake. “Securing the steel industry is therefore not only an economic policy task, but also a core component of the country’s security and resilience,” she notes.
Christian Koehl Germany
Germany to hold steel and automotive summits: IG Metall calls for concrete results
German Chancellor Friedrich Merz has announced plans to convene both a steel summit and an automotive summit to address mounting industry challenges.
According to official government press records, the summits will bring together steel producers, automotive manufacturers, trade unions, and federal states in the near future. The exact dates will be announced once preparations are complete.
IG Metall welcomes decision
The metalworkers’ union IG Metall welcomed the announcement, stressing that workers urgently need concrete solutions amid job losses, uncertainty, and lack of prospects across the steel and automotive industries.
Steel industry: need for concrete results
The steel summit carries particular importance for Duisburg, home to Europe’s largest steelmaking hub. Jürgen Kerner, vice chairman of IG Metall, emphasized that, while Merz’s commitment to Germany as a steel production hub is welcome, lip service is not enough, and tangible outcomes are needed rather than delays.
IG Metall’s key demands:
- Effective EU tariff regulations to counter steel dumping from China and Russia
- Competitive industrial electricity prices starting January 1, 2026
- Corporate responsibility to avoid plant closures and relocations
For Duisburg and beyond, IG Metall stressed that the summits must not become symbolic events. Kerner underlined that the challenges are well-known, and solutions already exist, while what is required now are concrete results that send a clear signal to employees and project jobs.
Automotive industry: jobs versus relocation
In the automotive sector, Christiane Benner, first chair of IG Metall, criticized recent job cuts and called on employers to end relocation debates. Instead, she urged cooperation with workers to ensure job security and foster innovation in the industry.
