EU ETS reform splits Europe's steelmakers
On 17 July, the European Commission presented its revision of the EU Emissions Trading System, alongside an Electrification Action Plan setting an indicative target for electricity to cover 46% of final energy consumption by 2040. For sectors covered by the CBAM, including steel and cement, the proposal slows the phase-out of free allowances and postpones its completion to 2038. From 2031, continued access to free allocation would be tied more closely to verified decarbonization plans and investments.
The proposal now moves to negotiations in the European Parliament and Council, with an interinstitutional roadmap targeting an agreement in the first quarter of 2027. The political divide was already visible before the proposal was published: a group including Italy and Poland called for greater flexibility in free allocation, while Spain, the Netherlands and other countries warned against weakening the carbon-price signal.
A divided industry
ArcelorMittal, thyssenkrupp Steel, and voestalpine — together representing around 60% of Europe’s integrated steel production — are calling for a temporary pause in ETS cost escalation. The companies estimate that, without adjustment, steel-intensive manufacturing activity in the EU could fall by 30-40%, putting up to 5 million jobs across the value chain at risk. ArcelorMittal executive chairman Lakshmi Mittal frames the choice as being not between climate ambition and competitiveness, but between a climate strategy that strengthens Europe's industrial resilience and one that hollows it out.
A separate coalition — SSAB, Outokumpu, Salzgitter, Saarstahl, Dillinger, and Stahl-Holding-Saar — takes the opposite position, urging Brussels to preserve the current trajectory, including keeping the Linear Reduction Factor at 4.4% until at least 2035. The group says it has collectively committed more than €10 billion to low-emission steel production, and argues that weakening the carbon price signal would undermine the investment case already in motion.
Why it matters downstream
For wire drawing plants, tube mills, spring and fastener manufacturers, the outcome could affect several cost drivers at once, including steel inputs, electricity and process heat. Eurofer’s Director General Axel Eggert has dismissed as unrealistic the idea that European steelmaking could complete its decarbonization by 2033 without access to competitively priced clean electricity and hydrogen.
Picture by worldsteel
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