EUROFER is to challenge the European Commission decision on CO2 benchmarks under the European Emissions Trading System (ETS), once they are adopted by the Commission in mid-April.

“From the very beginning of the Commission consultation process on benchmarking we have stressed that the proposal made by the Commission’s climate department for the steel benchmarks infringes the ETS directive. The directive requires that best performers in carbon leakage sectors (ie sectors subject to international competition) receive for free all the allowances necessary to cover their emissions in order to prevent de-localisation of emissions, production and jobs to countries outside Europe – that’s the rule, but since it is not being applied for the steel industry, resulting in billions of additional costs, we now have no other choice than to go to court,” said Gordon Moffat, director general of EUROFER.

The directive requires the setting of benchmarks which determine the level of free allowances for industrial sectors from the start of 2013. The starting point for the benchmarks ‘shall be the average performance of the 10% most efficient installations in a sector’, to quote the directive.

Yet the steel benchmarks for primary steelmaking set by the Commission are not based on this rule. The Commission did not assign the full carbon in unavoidable waste gases to the steel benchmarks, despite there being specific provisions in the directive for the use of recovered waste gases for electricity generation due to their substitution of primary fuels saving millions of tonnes of CO2 emissions. The benchmarks are therefore technically unachievable and, as a consequence also now disincentivise investment in the recovery of unavoidable waste gases. In addition, the Commission did not, in setting the benchmarks, use data provided by the industry in accordance with the directive but rather relied on literature on best technologies which did not reflect the technical realities of the industry, further skewing the benchmarks and increasing the financial burden.

The resulting additional costs for the EU steel industry will be about €5bn over the third trading period (2013 to 2020) on top of the €6bn already resulting from the best performer benchmarks and on top of the over €12bn of costs for primary and secondary steelmaking due to ETS-related increases in electricity prices.

Any further tightening of the ETS by increasing the reduction targets or holding back of allowances from the system could easily double the additional costs as well as the total costs.

As a consequence the European steel industry, through EUROFER, has instructed its lawyers to initiate a request for annulment of the Commission decision on the steel benchmarks.

The European steel industry is a world leader in its sector, with a turnover of €190bn and direct employment of 420 thousand highly skilled people, producing 200Mt/y of steel. More than 500 steel production and processing sites in 23 EU member states provide direct and indirect employment and a living for millions of European citizens.