To the Heads of State and governments of the European Union,
We, the undersigned CEOs of the European steel industry, are writing to you ahead of the final negotiations on the reform of the EU Emissions Trading System (EU ETS).
We agree that climate change is a critical issue that urgently needs to be addressed at international level, and we fully support efforts to reduce CO2 emissions cost effectively across the whole EU economy.
In the weeks ahead, you will have the final opportunity to shape an EU ETS that better addresses these objectives while preserving Europe’s steel industry and the millions of employees it supports. You can avoid burdening the sector with high costs that will constrict investment, or that will increase the risk of job losses and plant closures in the EU.
The steel sector pulls its weight in lowering CO2 emissions. However, with technically unachievable steel benchmarks, the EU ETS legislation creates high carbon costs for even the best performing steel plants, despite the fact that the sector has been unambiguously recognised in the European Commission’s own Impact Assessment as being at very high risk of carbon leakage. In its current form, the EU ETS favours steel imports from third country competitors that do not have such costs and which have a far higher carbon footprint than steel made in the EU.
Were the EU ETS directive to be adopted without some of the improvements requested by the European Parliament there would be a shortage of emissions allowances for our industry of around 35% by 2030. There will be no spare allowances from previous years available to alleviate the impact of the post 2020 period in the steel industry. In addition, the sector would be even more exposed to the carbon cost pass-through in electricity prices. Other industry sectors under the EU ETS do not face these constraints to the same degree.
We therefore call upon you to help preserve the sustainability and global competitiveness of the European steel industry. Europe must be able to produce the innovative steels that underpin modern society - and that help reduce CO2 emissions.
It is essential that the improvements that have been agreed by the European Parliament are also adopted by the Council:
Allow a full free allocation for waste gases. This would secure an achievable set of benchmarks for steel – as is already the case in other sectors.[1]
Adjust the ratio of free and auctioned allowances by 5% so that there can be sufficient free allocation for all industry sectors covered by EU ETS, minimising the risk of the cross sectoral correction factor.[2]
Provide legal certainty that CO2 costs passed through to industry through higher electricity prices (so-called indirect costs) will be fully offset in all member states. Any centralised fund providing minimum compensation at EU level should be fully financed from the auctioning share and no arbitrary ceiling should be applied to potential additional national compensation.
Ultimately, if even the top players in an industry are at risk of facing a shortage of free allowances, despite their best efforts, then at least the best performers in those sectors most at-risk of carbon leakage should be shielded from the cross sectoral correction factor in order to retain the full allocation of emissions allowances at the benchmark level.[3]
This will help to ensure reform that encourages climate protection and the fulfilment of the EU’s CO2 reduction commitments, while also limiting the impact upon the European steel industry’s competitiveness, ability to innovate and the jobs it supports.
Yours sincerely,
76 CEOs of the European steel industry
[1] Amendment 165 of the European Parliament
[2] Amendment 71 of the European Parliament
[3] Amendment 71 of the European Parliament
