European steelmakers face costs of €28/tonne of steel to comply with ETS obligations by 2030, according to a study commissioned by steel lobby Eurofer, which said the burden could “destroy the industry’s economic viability”.
The analysis carried out by Dutch consultancy Ecofys found that the total net carbon costs for the EU’s steel sector in the period 2021-2030 are projected to amount to €34.2 billion.
This translates into €10/t of steel in 2021, and €28/t crude steel in 2030, when taking into account both the need to buy EUAs beyond those allocated freely and higher electricity prices due to utilities passing on their ETS costs.
The study was presented at the EU Parliament’s full plenary session in Strasbourg on Thursday and could put pressure on lawmakers to scale back the European Commission’s proposal for post-2020 EU ETS reforms, despite other analyses suggesting that industries including steel are able to manage ETS costs.
“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,” said Eurofer director general Axel Eggert.
“Given fierce global competition and surging imports resulting from worldwide overcapacity, the industry will be unable to pass on these unilateral costs,” he added.
The analysis and subsequent warnings represent the first major effort by industry to respond to the Commission’s proposal, as lawmakers prepare to debate potential changes to it over the next 12 months.
It comes almost a week after the European Commission published a separate paper outlining how extensively industries such as steel have been able to pass on much of their ETS costs to their customers, findings that environmentalists say undermine the case for their continued extensive free allocation.
The steel industry’s plea for changes also comes after France has urged changes to the proposal to take into account the development of carbon pricing in the rest of the world, which could cut the free handouts to reflect the lower risk of carbon leakage as more countries put a price on their emissions.
By Ben Garside – email@example.com