Three companies that together make roughly 60 percent of Europe’s integrated steel have asked Brussels to hit pause. ArcelorMittal, thyssenkrupp Steel and voestalpine want the escalating costs of the EU Emissions Trading System frozen until the tools for affordable decarbonisation exist, according to a report from OneStop ESG.
Their case was laid out by ArcelorMittal executive chairman Lakshmi Mittal in the Financial Times. The steelmakers say the phase-out of free emissions allowances, combined with a shortage of affordable green hydrogen, competitively priced low-carbon electricity and large-scale carbon capture, will drive deindustrialisation. They project a 30 to 40 percent fall in steel-intensive manufacturing and warn that up to 5 million jobs across European value chains are at risk.
The numbers behind the plea
Free allowances for sectors covered by the carbon border adjustment mechanism, or CBAM, end entirely by 2034. CBAM taxes the carbon content of imports such as steel, aluminium and cement. It does nothing, the companies point out, for European steel sold abroad, where rivals face no comparable carbon charge.
The industry association Eurofer estimates about €45 billion of EU steel exports are exposed. Production costs in the EU are expected to rise by about 50 percent by the early 2030s as free allowances disappear.
Switching from coal-fired blast furnaces to direct reduced iron in electric arc furnaces takes huge volumes of hydrogen and clean power. The steel sector alone would need about 2 million tonnes of renewable hydrogen a year by 2030, the report says, and Europe cannot supply that at a price that makes green steel pay.
Executives and critics
Marie Jaroni, chief executive of thyssenkrupp Steel, said the ETS needs a “reality check.” Herbert Eibensteiner, voestalpine’s chief executive, said ending free allocation is already pulling away money needed for the decisive phase of transformation, and called the pause essential to protect the company’s greentec steel investments.
The companies say they are not asking to scrap the ETS. They want its revenues ring-fenced and sent back into industrial decarbonisation, and they stress their objection is to the timetable, not the goal.
Not everyone agrees. SteelWatch calls the free allowances a hidden fossil subsidy that has lasted nearly two decades and urges the Commission to ignore what it calls industry doomsayers. Environmental groups say CBAM is already nudging other countries toward carbon pricing. Leaders at companies such as Salzgitter, which have made big investment decisions around the current rules, warn that changing them now could penalise the first movers.
Reports suggest the Commission may already be weighing proposals to slow the phase-out, after concerns from member states including Germany. Mittal’s framing was that the choice is between a climate strategy that strengthens Europe’s resilience and one that hollows it out.
