Industry News

Following the Paris conference ‘A Carbon Border Adjustment Mechanism for Climate – Addressing carbon leakage to strengthen global climate action’, organised by the European Commission and the French Ministries of Finance, Economics and Climate Transition, EUROFER – the European steel association emphasises that key issues such as resource shuffling, exports and the inclusions of products further down the value chain need to be addressed.

Alarmingly, during the conference, the Commission announced that legislative proposals on crucial aspects of the Carbon Border Adjustment Mechanism (CBAM) regulation, including exports provisions and coverage of downstream sectors, will only be presented at the beginning of next year. Furthermore, a top priority for securing steel decarbonisation investments in Europe – which is tackling resource shuffling – is currently not event listed in the Commission’s planning of upcoming legislative proposals. This situation contradicts the clear political guidance and sense of urgency expressed by both French Ministries during the conference and supported by other member states. 

EUROFER is concerned about the differing timelines allocated to the simplification and effectiveness of CBAM. While the Commission is fast tracking simplification through the Omnibus Package, the European steel industry remains deeply worried about the lack of urgency in ensuring CBAM’s effectiveness.

“This year’s review of CBAM is critical to achieving both objectives. To ensure its effectiveness, a watertight design is needed. This urgently requires major improvements, such as introducing a structural legislative solution to the very high risk of resource shuffling; introducing a structural solution to preserve European exports, thus avoiding carbon leakage on global markets; as well as extending the CBAM’s scope to steel intensive downstream products. Additionally, other design elements, such as stringent default values and the free allocation adjustment, must uphold the mechanism’s environmental integrity,” states EUROFER.

“If these adjustments are not implemented this year, the combination of CBAM and the scheduled phase-out of free allocation will fail to provide adequate protection against carbon leakage. This could further incentivise the relocation of production to third countries, negatively impacting both steel and downstream sectors.” 

“In-line with these recommendations, a more effective yet simpler CBAM is both possible and urgently needed. Launching it without the necessary improvements would further erode the competitiveness of the European steel industry. This is indispensable given that the EU carbon price has reached approximately 80€/t, while over 25 million tonnes of steel – equivalent to around 20% of EU production – are imported annually from third countries without any carbon cost.”