Brussels/Strasbourg, 26 November – A landmark assessment of the proposal for the fourth review of the European Union Emissions Trading System (EU ETS) has revealed that the cumulative financial burden of the proposed changes would almost wipe out the industry’s margins.
The report, undertaken by leading consultancy ECOFYS, was unveiled yesterday at a gathering of Members of the European Parliament and steel industry representatives on the side-lines of the monthly Plenary session in Strasbourg.
Speaking shortly after the release of the report, EUROFER Director General Axel Eggert said, “ECOFYS has shown that the projected cost for the steel industry of the proposal would be €34 billion for the post-2020 period. Their report finds that by 2030 the sector would face a shortage of 48% in free allowances for direct emissions, and that 76% of indirect carbon costs would not be covered by financial compensation.”
“This staggering €34 billion figure equates to almost €30 per tonne of crude steel by 2030. Given that the steel industry’s average EBITDA has fluctuated around €35 over the past few years, this proposal can only be expected to destroy the industry’s economic viability.” emphasised Mr Eggert. “Given fierce global competition and surging imports resulting from worldwide overcapacity, the industry will be unable to pass on these unilateral costs.”
Thanks to sustained investment in innovation the steel industry has significantly reduced its environmental impact: energy usage, use of ‘reducing’ agents, and CO2 emissions have been halved in the past few decades.
“Innovation requires investment: the present proposal would actually reduce the ability of steel producers to make such investments,” argued Mr Eggert. “There should be no additional direct or indirect costs at the level of best performing installations. This would incentivise and facilitate the innovation needed to meet CO2 reduction objectives.”
In its recent EU ETS position paper, EUROFER outlined a number of potential solutions that would reduce the cost burden.
Mr Eggert concluded, “The measures EUROFER has developed would facilitate investment, actually helping to achieve the EU’s environmental targets more effectively. Steel is part of the solution – not the problem – and we are already working hard to meet the environmental challenge, and succeed.”
ECOFYS Report
The ECOFYS report is available here: www.ecofys.com
About the EUROFER EU ETS Position
In its recent EU ETS position paper, EUROFER outlined a number of potential solutions that would reduce the cost burden. These measures include:
- 100% free allocation at the level of the 10% best performing installations for sectors at risk of ‘carbon leakage’
- Realistic benchmarks based on real data from the most efficient installations, reflecting actual technological progress,
- Removal of the linear reduction of benchmarks and the cross sectoral correction factor in order to prevent the free allocation falling below technically and economically feasible levels,
- Compensation for indirect carbon costs at the level of best performers in all member states.
The full position paper is available at: www.eurofer.eu
About the European steel industry
The European steel industry is a world leader in innovation and environmental sustainability. It has a turnover of around €170 billion and directly employs 330,000 highly-skilled people, producing on average 170 million tonnes of steel per year. More than 500 steel production sites across 24 EU Member States provide direct and indirect employment to millions more European citizens. Closely integrated with Europe’s manufacturing and construction industries, steel is the backbone for development, growth and employment in Europe.
Steel is the most versatile industrial material in the world. The thousands of different grades and types of steel developed by the industry make the modern world possible. Steel is 100% recyclable and therefore is a fundamental part of the circular economy. As a basic engineering material, steel is also an essential factor in the development and deployment of innovative, CO2-mitigating technologies, improving resource efficiency and fostering sustainable development in Europe.