Council and European Parliament must now take responsibility and provide robust safeguards against carbon leakage
The European Parliament and the EU Council came to an agreement over the Commission proposal for a Market Stability Reserve (MSR) in a meeting yesterday evening 5th May. The reserve will be introduced earlier than originally proposed by the Commission, in 2019 instead of 2021. The so-called “900 million back-loaded” allowances, which are deducted from the auctioning volumes during the period 2014-2016, will be placed directly into the reserve as well as hundreds of millions of unallocated allowances from plant closures which should have been auctioned in 2019 and 2020 respectively. As a result, the carbon price is likely to increase significantly already before 2021; this will cause EU steelmakers to face even tougher times with regards to their international competitors which do not face similar CO2 costs.
The EU steel industry has lost about 20% of its workforce since the start of the economic crisis in 2008. Profit margins in the EU are extremely low, further pushed down by unfair trade from non-EU steel producing countries and high EU energy and regulatory costs, hampering the recovery and investment in the sector. “Any additional costs not born by our competitors outside the EU may have disastrous effects on our industry, employment and, in the mid- and long-term, on the EU’s major manufacturing value chains and the EU economy as a whole of which the steel industry is an essential part”, said Axel Eggert, Director General of EUROFER. “We welcome the notion incorporated into the agreement that the competitiveness of the EU’s industries at genuine risk of carbon leakage must be protected. But this may end up being rhetoric as this agreement will substantially increase carbon and electricity prices already before the improved and adequate measures against carbon leakage should come into force in 2021”.
“Based on this decision to alter the fundaments of what should be a purely market-based EU Emissions Trading Scheme, it is now time for the EU institutions to take full responsibility for the EU industry’s competitiveness by adopting clear and long-term carbon leakage measures as soon as possible,” added Eggert. “These measures must now be based on realistic impact assessments for industrial sectors at risk of carbon leakage such as steel preventing any direct or indirect costs from the ETS at least at the level of the most efficient installations,” he further stressed.
EUROFER therefore considers the following measures as crucial until similar CO2 legislation is established for its global competitors:
- 100% free allocation at the level of the 10% most efficient installations, based on realistic, technically and economically achievable benchmarks for the steel industry. This will require the deletion of the so-called correction factor.
- Full off-setting of the CO2 costs passed through by the power sector to the steel industry in all EU member states, at the level of the most electricity efficient EU installations.
The European Council Conclusions of October 2014 clearly support this approach with its order of allocating first free allowances for leakage sectors based on realistic benchmarks and actual production. The notion of some stakeholders that allowances for sectors at risk of carbon leakage are limited is not supported by the Council Conclusions. “This is also the only smart way to achieve a healthy and innovative industry; shortage of allowances and unreachable benchmarks for even the best plants are a clear disincentive to invest in Europe”, Eggert added.
Steel is 100 % recyclable, over and over again, without loss of its unique properties – a permanent material for today´s and future generations. STEEL MADE IN EUROPE is essential. The EU steel industry plays a vital role in many of Europe´s strategic supply chains. It offers value added products and services developed in close cooperation with its customers to create a stronger, lighter and more sustainable world. EUROFER, the European Steel Association, represents almost 100 percent of steel made in Europe, combining a turnover of approximately €166 billion – a share of 1.3 percent in the EU’s GDP. At more than 500 steel production and processing sites in 24 EU member states we provide direct employment for 335 thousand people and indirect employment for millions of European citizens.