Eurofer has criticised a European Commission decision on benchmarks that set the level of free emission allowances for industry.
The benchmark covers the third emissions trading period from 2013 to 2020 under the EU Emission Trading Scheme (ETS).
Eurofer said: "The climate change directive provides for free allowances for industry subject to benchmarks with the best 10% of performers in industry getting 100% of their allowances for free.
Yet the benchmarks for steel agreed by the European Commission and member states are substantially below this."
Pointing out that this is a violation of the directive, the NGO said European policy was doing nothing to tackle climate change in an efficient and effective way.
The decision also makes capacity increases in industry almost impossible, Eurofer said, adding there was no longer any incentive for industry to invest in capacities or jobs in Europe.