European steel producers are calling for the CBAM to be strengthened

The European steel industry has called on the EU institutions to preserve the integrity of the Emissions Trading Scheme (ETS) and to strengthen the Cross-Border Carbon Adjustment Mechanism (CBAM).

Outokumpu, SSAB, Salzgitter, Saarstahl, Dillinger and Stahl-Holding-Saar emphasised in a joint statement that they are collectively investing over €10 billion in low-emission steel production and modernised assets. However, further investment requires a predictable and reliable policy framework.

The companies are calling for the preservation of key mechanisms of the ETS¹, which they describe as the cornerstone of the EU’s climate policy.

“The mechanism provides a market-based carbon price signal, which underpins the business case for industrial decarbonisation, and this signal must not be weakened,” the statement reads.

The steelmakers have called for the linear reduction factor (LRF) to be maintained at 4.4 per cent until at least 2035, after which the trajectory should be aligned with the EU Climate Act 2040, for the current CBAM rate and the phase-out trajectory for free allowances to be maintained, and to prevent the Market Stability Reserve (MSR) from being used to artificially increase the supply of allowances.

“Weakening the ETS1 will not boost Europe’s competitiveness. On the contrary: it will undermine investment certainty, penalise early market entrants and delay the industrial transformation the region needs,” the appeal states.

The signatories believe that the main pressure on competitiveness stems from high electricity costs due to dependence on fossil fuels, infrastructure gaps and global excess steel production capacity, rather than from carbon pricing.

The companies believe that ETS1 must be underpinned by robust safeguards against carbon leakage. Therefore, it is now up to the CBAM to prove its effectiveness. As noted, its effectiveness will depend on closing existing loopholes by including steel-intensive processed products, preventing circumvention and developing a permanent export solution.

Steelmakers believe that ETS1 revenues must be channelled back into industrial decarbonisation, with a particular focus on CBAM sectors.

It should be recalled that ArcelorMittal is calling for the scope of the CBAM and trade measures to be extended to steel derivatives.