Study shows steel industry’s viability destroyed if the EU adopts Commission proposal on Emissions Trading (EU-ETS)

A study conducted by the renowned economic consultancy NERA comes to the conclusion that the European steel industry's viability would be destroyed if emissions allowances under the revised European Trading System (EU-ETS) were not allocated for free to the sector, given that it could not pass through any of the additional costs imposed by the scheme.The study examines the emissions costs of two EU countries (UK and Germany), assuming 100% auctioning of the steel industry’s allowances, no cost-pass through ability, and a CO2 price at 30 Euro per tonne. The emissions costs of the UK steel industry amounts to 162 percent of the average short-run profit from 1995 to 2006, and 414 percent of the average long-run profit over the same period. In the other country, Germany, one of the best performing steel producing European countries in that period, the industry has fared better, but emissions costs would still amount to 96 percent of average short-run profit and 203 percent of average long-run profits in the same period.

“We again urge the heads of governments and state to secure the competitiveness and continued existence of the steel industry in Europe”, EUROFER director Gordon Moffat said with view to tomorrows EU summit.

Four key issues are crucial for the European steel industry:

• Maintaining 100% free allowances for sectors at risk of carbon leakage, based on achievable benchmarks
• Maintaining fully free allowances for the environmentally beneficial recovery of waste gases from the steelmaking process (about 50% of CO2 emissions from steelmaking)
• Compensation for the ETS related increase of electricity costs
• The reduction target must be based on the Kyoto reference year 1990 and not 2005 (according to the European Environment Agency, the EU steel industry from 1990 to 2004 already reduced its CO2 emissions by over 20 %)

Represented by EUROFER, the European steel industry is the world leader in its sector with a turnover of over EUR 140 billion and direct employment of 370 thousand people, producing over 200 million tons of steel per year.

Contact

Gordon Moffat, Director General +32 2 738 79 26 (g.moffat@eurofer.be)

Axel Eggert, Director Public Affairs +32 2 738 79 34 (a.eggert@eurofer.be)