UK Steel has welcomed the reforms to the EU Emissions Trading System (ETS) announced by MEPs today and giving steelmakers hope that future costs might be kept in check.

Gareth Stace, director of UK Steel, commented: “The European Parliament should be applauded for finding a balance between the aims of those trying to drive carbon prices higher and the needs of sectors like mine that are trying to compete internationally on tiny margins, often against plants facing none of the same regulatory costs.

“However, policymakers must continue to focus on maintaining the international competitiveness of vulnerable sectors such as steel as the revisions to the system, which will apply from 2020, go through the remaining stages of the negotiation process.

“The EU ETS already has significant cost implications for some UK steel companies. Ill-judged reforms risk raising compliance costs still further, undermining the viability of the UK’s remaining steel plants, the thousands of jobs they provide and their potential role in a new, global, post-Brexit economy. They could also push production to other less efficient plants overseas, therefore achieving nothing for the environment.”

According to UK Steel, the EU steel association, Eurofer, estimated that the European Commission’s original proposals for reforming the EU ETS after 2020 could add €30 to the cost of producing a tonne of steel. Costs on this level would be disastrous in a market where contracts are won or lost on a few euros per tonne.

UK Steel believes that the European Parliament’s reforms should help reduce this impact by ensuring there is more protection for the most vulnerable sectors in the form of free EU ETS allowances. Particularly helpful in this regard is an option to reduce the volume of allowances auctioned if there is a shortage of free allowances, and a measure ensuring that the most 'at risk' sectors will not have their free allocation cut if there still remains a shortage after that. The Parliament’s reforms also have a number of additional benefits, such as improvements to an Innovation Fund for breakthrough technologies.