New ETS targets will hit energy-intensive industries – BDG

The new ETS benchmarks presented by the European Commission, which call for a reduction in the benchmarks for free allocation of allowances as early as this year, send a disastrous signal to Europe’s energy-intensive industries. This is stated in a press release from the Federal Association of the German Foundry Industry (BDG).

As noted, European competitors from China and India still do not face comparable carbon emission costs.

Of the approximately 4,000 foundries in the EU, the statement notes, only 22 are part of ETS 1, and 11 of them are located in Germany. However, these few companies produce nearly 50% of the country’s cast iron and face significant competitive pressure in the global market.

The proposed benchmarks would require the foundry industry to achieve tenfold greater efficiency, even though the equipment has not undergone any comparable efficiency improvements. Instead, emissions from furnaces used in the sector are likely to be “lumped together” with emissions from EAFs.

“The planned significant reduction in reserve benchmarks this year will effectively mean significantly fewer free allowances. For the German foundries affected, this represents an additional burden of up to €100 million during the fourth trading period,” the BDG explained.

The industry association believes that lumping together electric and fossil fuel technologies ignores the real possibilities for transformation. Even those companies that have already planned for decarbonization cannot currently fully electrify many processes—due to a lack of grid connections, accessible green electricity, and reliable infrastructure.

The transformation will only be successful if policymakers take real-world conditions into account, the association notes.

The foundry industry supports the goal of climate neutrality, but the green transition must not overburden SMEs. The transformation must also be guided by framework conditions that are beyond the control of the companies themselves—specifically, competitive electricity prices and an effective cross-border carbon tax.

“The planned 40–50% reduction in the EU-ETS1 benchmark for the foundry industry, which, moreover, is retroactive to 2026, will effectively result in each affected company incurring costs in the millions of euros, which is simply unacceptable in the current situation. This paves the way for ‘cold’ decarbonization, which is linked to the loss of industrial added value rather than climate protection,” noted Martin Teuringer, CEO of the BDG.

As a reminder, on May 12, the European Commission proposed updated cap levels for the EU Emissions Trading System (EU ETS) for 2026–2030. The document provides for the allocation of a greater number of free emission allowances to industry over the next few years, which could potentially save companies €4 billion in CO2 emission costs.