Industry association UK Steel has welcomed the agreement by the EU and UK to work towards formally linking their Emissions Trading Systems (ETS), as well as to improve the EU quota for UK sections, Kallanish notes.
It says this will enable better access to the UK’s biggest export market, with 75% of UK steel shipments going to the EU, worth nearly £3 billion ($4 billion) annually. It points out it has advocated the linking of the carbon markets since 2019, noting the UK’s minimal size and illiquidity.
The move will exempt UK steel exports to the EU from Carbon Border Adjustment Mechanism (CBAM) costs and administrative burdens.
“We understand that the improved EU steel quotas will relate to arrangements in relation to the EU’s steel safeguards, which will ease export restrictions for steel angles and heavy sections,” its statement notes.
The European Commission says the EU and the UK agreed to safeguard historic tariff-free trade in steel products under category 17. The EU will thus make a legislative proposal for a country-specific quota for UK steel in category 17 – angles and sections – under the current safeguard.
Without linkage or the improved market access in place, UK producers faced the prospect of increased trade friction, UK Steel notes. EU importers would have had to pay CBAM levies and face tight safeguard quotas on UK steel products – costs that would likely be passed back to UK exporters or result in lost market share.
Gareth Stace, director general at UK Steel, says: “UK Steel welcomes the formalised plan to link the UK and EU Emissions Trading Schemes and new, improved market access. This will be a significant step in reducing trade frictions in steel with the EU, our biggest export market, by ensuring equivalent carbon costs and easier exports. It also eliminates the risk of costs from the EU Carbon Border Adjustment Mechanism, where the burden particularly falls on SMEs.”
“Crucially, linking the schemes lowers costs for the sector and provides long-term security, particularly if UK ETS prices were to exceed those in the EU in the years ahead, making linkage all the more important for competitiveness,” he concludes.
Carrie Bone UK
