The European Commission is expected to put forward its Fit for 55 package of climate and energy policy measures on 14 July 2021.

According to the European Steel Association (EUROFER) the Fit for 55 package is one of the most significant – and largest – groups of measures the EU has ever released in one go. It will completely revise the basis of EU climate and energy policy in an attempt to bring it into line with the EU's political ambition.

“EU institutions have agreed to more ambitious cuts to greenhouse emissions over a fairly short time frame. This package of new laws to be proposed by the Commission is intended to legislatively implement the political ambition”.

Axel Eggert, director-general of EUROFER

The Fit for 55 package includes: the revision of the EU Emissions Trading System (ETS), a Carbon Border Adjustment Mechanism (CBAM), revision of the Energy Tax Directive (ETD), amendments to the Renewable Energy (RED) and Energy Efficiency Directives (EED) to implement the ambition of the new 2030 climate target, as well as others on reduction of methane emissions from the power sector, emissions from land use and rules on passenger cars and alternative fuels.

“The European steel industry has long-established plans to reduce emissions by 55% compared to 1990 levels, and has over a hundred highly-advanced low-carbon projects spread across Europe”, added Mr Eggert. “However, the success of these projects is contingent on being able to direct the appropriate resources and find markets for the resulting ‘green’ steels, which will come at a higher cost than conventional steel”.

Mr Eggert stated, “For Fit for 55 – and the associated Green Deal – to become successful growth strategies, they must provide three things: effective carbon leakage protection, affordable low-carbon energy, and firm support for the development and roll-out of breakthrough technologies”.

Carbon Border Adjustment Mechanism and ETS revisions

EUROFER is concerned at the European Commission’s apparent intentions for the EU ETS revision. The steep reduction of free allocation would markedly increase industry exposure to EU ETS costs. The ‘rebasing’ and Market Stability Reserve changes would artificially drive up the carbon price for the same level of 2030 climate ambition.

The Commission is expected to propose that most of the European steel sector be subject to CBAM in the first wave. However, at this stage it is unlikely that the proposal will include any solution for EU export competitiveness or provide any effective measures against circumvention practices by importers, such as resource shuffling or cost absorption.

“Higher climate ambition requires strengthened – not weakened – carbon leakage protection.”

Axel Eggert, director-general, EUROFER

“Higher climate ambition requires strengthened – not weakened – carbon leakage protection”, said Eggert, adding that artificially higher carbon costs would hinder the steel sector’s ability to reduce emissions and meet its targets. “Even before the current EU ETS revision, the sector was facing €30-45 billion in EU ETS costs between 2021-2030,” he said.

EUROFER is calling for CBAM and the EU ETS to be complementary systems, without any further reduction in free allocation below the benchmark level, and compensation of indirect CO2 costs until the first industrial decarbonisation projects have been upscaled and work properly.