EU ETS could cost steel sector over £300mn

UK Steel, the largest trade union from the steel sector has issued a warning about the need for reform of the decarbonisation policies. In particular they focus on the EU Emissions Trading System. They have warned that the EU ETS is already stunting the competitiveness of the industry and its ability to invest in advancement and innovation.

In addition carbon leaking measures, which are aimed at stopping the EU ETS affecting international competitiveness of the vulnerable industry, are not delivering the level of support promised.

If changes are not made, it is intended that EU ETS will add nearly £30 a tonne to average steel production costs by 2030. At today’s level contracts are won or lost on as little as £5 a tonne.

The European Commission has therefore proposed reform of the scheme to secure the steel industry’s future. UK Steel and Community have published a number of proposals to make a level playing field between competitors and reduce the costs of compliance.

Gareth Stace, Director of UK Steel, says: “The steel sector employs around 30,000 people, many in areas of relatively high unemployment, and contributes more than £45bn to the UK economy. And yet it is a sector under extreme stress. Surplus production capacity in the global market, unfair trade practices, a strong pound, high energy costs and regulatory pressures such as the EU Emissions Trading System are all making it hard for UK plants to compete.” “The steel sector wants to play its part in meeting the UK’s carbon targets and is actively researching lower carbon production methods. But it needs support and the current regulatory regime – and particularly the EU ETS – is hindering rather than helping by reducing our overall competitiveness and removing money each year that could be invested in innovation.” Roy Rickhuss, General Secretary of Community, says: “This is about ensuring the UK Steel Industry is helped to decarbonise in a way that ensures its future and the many thousands of valuable jobs it provides, rather than being pushed overseas. In its current guise, the EU Emissions Trading System is having some serious unintended consequences. It is unwittingly contributing to the headwinds holding back the UK steel sector and we urgently want the European Commission to understand this and to work with us to find a better way forward.” It has proposed the following principals for reform:

1. Focus on carbon leakage. Remove the cap on free allocation within the industry and set better benchmarks.

2. Offer funding for innovation through an ETS Innovation Fund and greater access to the EU’s Research Fund for Coal and Steel.

3. Remove small emitters from the ETS and allow an opt out of 50,000 tonnes CO2 each year.