EU to continue issuing free carbon permits after 2030

Steel producers achieved concessions in negotiations on changes in the European carbon market

European producers have secured the continuation of free CO₂ permits under the Emissions Trading Scheme (ETS) after 2030. Kallanish reports about it with the reference to sources.

In May 2022, a committee of the European Parliament voted to speed up the phasing out of free ETS allowances, reducing them for European steel producers from 2030. However, at a recent meeting, the parties reached an agreement to extend them for at least another two years, until 2032.

Peter Liese, lawyer and negotiator involved in reforming the ETS system, confirms in a statement that a first agreement was reached. The Commission proposal wanted to get rid of the respective calculation methodology which would have created an enormous challenge for the steel industries, much bigger than for other industries, after the implementation of the amended ETS. Now European legislators have come to the conclusion that the rules for the steel industry will remain unchanged.

However, despite these concessions, Peter Liese emphasized, that steel producers are not released from their obligations. He explained that industry still has to cut emissions every year, and the annual CO₂ cap is getting tighter every year.

The Association of European Steel Producers (EUROFER) welcomed the development, saying it was «an important element for a sector that needs capital investment of more than €30 billion by 2030 to reduce emissions in line with EU targets». The organization said, that free allocations, however, would be reduced as part of a plan to phase out quotas, and that the cost for the sector had yet to be calculated.

The ETS sets emission limits for about 10,000 large industrial enterprises in Europe, which must buy pollution permits on the market for every ton of CO₂ they produce. The scheme aims to encourage the adoption of clean technologies.

As GMK Center reported earlier, the carbon tax in the EU, which will be applied with the introduction of the Carbon Border Adjustment Mechanism (CBAM), from 2026 will cause European steel importers to face additional costs of €2 billion per year.