EUROFER Welcomes EU Vote on Carbon Border Adjustment Mechanism
The European Parliament has voted on its Carbon Border Adjustment Mechanism resolution, prior to a legislative proposal expected to be published by the European Commission in June. The resolution passed with a firm majority; Parliamentarians agreed on the principle that the EU’s higher climate ambition requires improved carbon leakage protection. European Steel Association EUROFER Director General Mr Axel Eggert said “The European Parliament has sent a clear signal that a workable carbon border measure is of critical importance for the transition of industry towards climate neutrality. The measure must fill the gap of the carbon cost differential with global competitors and imports instead of replacing or reducing current levels of carbon leakage protection. The straight replacement of free CO2 certificates with a border measure and full exposure to the costs of the EU Emissions Trading Scheme would be bad policy. Primary steelmaking makes up three-fifths of European production, and such producers would face carbon costs at least twenty times higher than global competitors exporting to the EU. This vote shows that the Parliament intends to defend manufacturing and jobs in Europe”.
Mr Eggert added “Higher climate ambition for 2030 and 2050 requires strengthened, not weakened, carbon leakage protection. This can only be achieved if the carbon border measure is implemented as a complementary tool to buttress existing carbon leakage measures. We welcome that elected MEPs recognised this. A border measure reinforcing existing carbon leakage measures is not double protection as such mechanisms are already only partial and digressive. A carbon border measure complementary to existing carbon leakage measures would decrease the product price impact on downstream sectors within the EU. This would better preserve the entire value chain. It would also reduce the direct impact on trade flows and mitigate trade tensions, providing a longer transition for negotiations over how other regions can follow Europe’s decarbonisation lead.”
European steel companies have been launching many projects to develop and implement breakthrough low carbon technologies. This transition will be successful only under the right market conditions facilitated by a supportive framework that includes effective carbon leakage measures. European industry in general, and steel specifically, need a level international playing field, one that favours fair competition, supports investment in innovation and the roll-out of breakthrough technologies. Markets for green materials must be created and appropriate low carbon energy sources also need to be available. Even with free allocation and compensation, EU producers bear carbon costs that are not applied to extra-EU competitors. This divergence will further increase in the future as the EU Emission Trading System is adjusted to attain higher levels of climate ambition. A carbon border measure without free allocation would see steelmakers in Europe, in effect, paying carbon costs multiple times higher than those faced by exporters to the EU