Implementing the proposed European Union Emissions Trading System (ETS) after 2020 would “…put the viability of the steel industry at risk”, European steel association Eurofer tells Kallanish. According to the association's director general, Axel Eggert, the ETS would threaten 330,000 jobs that the industry supports.

As calculated by Eurofer, the implementation of the regulatory framework would result in €34 billion of direct and indirect carbon costs for the steel industry between 2021 and 2030. “50% of the direct and indirect emissions would not be covered by free allocation or financial compensation”, increasing the costs up to nearly €30/tonne of crude steel in 2030, Eurofer explains.

In a position paper, Eurofer highlights several criticalities in the ETS framework, as well as several modifications that could improve the new regulation’s performance.

Among the suggestions, Eurofer recommends to eliminate the caps imposed on auctioning, and free allocation for companies operating in sectors at risk of carbon leakage after 2020.  If these caps were to be retained, “…the available free allocation should be distributed according to the relevant level of carbon leakage exposure”, Eurofer explains. Furthermore, the sectors at a “…very high risk” of carbon leakage should receive “…100% free allocation at the level of the top 10% of most efficient installations.”

The ETS should also be re-modelled utilising “…benchmarks in line with the technological progress” and “…real data”, rather than “…an arbitrary linear reduction factor”, the association explains.

The implementation of reliable benchmarks would provide more predictability for participants, "...guaranteeing an appropriate reward for those that have invested in emission reductions”, the position paper states.

“World steel demand is expected to rise between now and 2050. As a necessary product for economic activity, steel will continue to be produced globally. The question for EU policy makers is: do they want this production to take place in Europe, or abroad?” Eggert concludes.