Based on reporting by Lidia Tamellini.
Europe is witnessing an increasingly visible split within its industrial sector. As policymakers prepare to review the ETS, two distinct groups of steelmakers have emerged with opposing visions for the future of Europe’s flagship carbon market.
On one side are large companies advocating for slower emissions reductions, extended free allowances and a softer carbon pricing framework to alleviate mounting competitive pressures. On the other are producers that have already committed substantial capital to low-carbon technologies and argue that weakening the ETS would penalize companies that invested early while rewarding those that delayed their transition. Τhe companies lobbying most aggressively for ETS relief have significant exposure to conventional blast furnace production and have invested heavily in extending the operational life of carbon-intensive assets. From this perspective, preserving free allocations or slowing the tightening of the ETS directly alleviates the costs related to their investments.
On the other hand, producers such as SSAB, Salzgitter and Outokumpu have pursued business strategies centered around lower-carbon steelmaking, including electric arc furnaces, recycled steel and hydrogen-based production. For these companies, a robust and predictable carbon price is an advantage and a justification for the billions of Euros they have poured into decarbonizing. Weakening the ETS now makes their investments look foolish, and undermines their competitiveness all at once.
FACS Perspective
If companies that invested early in decarbonization lose the advantage they expected, future investment signals across European industry become less reliable. But ignoring the competitiveness pressures these companies face, also risks undermining Europe’s industrial strength in the long term. Companies across the affected industries need to calculate around finding cost-effective solutions to hedge costs and positively monetize what has effectively become a reality of business planning instead of a mere regulatory liability.
From our perspective, this split should not be framed as a choice between competitiveness and climate ambition. Europe’s heavy industries undoubtedly face genuine challenges, including high electricity prices, slow hydrogen deployment, weak demand for green materials and increasing international competition. However, these cannot be solved simply by reducing the strength of the carbon price.
This article is based on publicly available reporting by Carbon Market Watch. All rights, including copyright, remain with the original source.