Meeting with Eurofer on CBAM
18 June 2021, 10h00 to 11h00
Participants:
Eurofer:
Commission:
Kurt Vandenberghe,
Cabinet
SG.
SG.
Key points raised in the discussion:
Eurofer was of the view that a Carbon Border Adjustment Mechanism (CBAM) can and
should be implemented in conjunction with free allowances. Given that the steel sector was
only covered for 80% of its emissions by free allowances, it faced already under the current
system (at a current carbon price of around EUR 55 per ton of CO2) combined costs of EUR
2.7 billion for the purchase of ETS allowances and indirect costs due to carbon price on
power generation. This translated into average costs of EUR 15 to 20 per ton of primary steel.
A removal of all free al owances would translate into costs of around EUR 100 per ton of
primary steel. They argued that if CBAM was to be implemented with a sharp reduction
and/or removal of free allowances as of 2023, then steel should not be included as a CBAM
sector in the first wave.
Eurofer argued that CBAM should first prove itself and only then should free allocations be
reduced. They believed that even with the current level of free allowances (which is covering
only 80% of emissions), a moderate CBAM would still help offset additional costs and be
compatible with WTO rules. They also considered that maintaining free al owances allows for
a more moderate CBAM, which was more acceptable internationally. A phased-in approach
was also preferable in their view to see whether the CBAM functions well.
Eurofer explained that a reduction of free allowances would jeopardize the possibility for
companies to invest in decarbonisation technology projects, which are crucial investments
now to ensure long-term competitiveness and decarbonisation. Eurofer presented a slide
with potential investments (see attached), amounting to 54 decarbonisation projects which
would lead to a 1/3 reduction of CO2 emissions of the steel sector and a 2% reduction of
total EU CO2 emissions by 2030 (compared to 2018).
support in form of various EU funding instruments. They also highlighted efforts to launch a
new Important Projects of Common European Interest (IPCEI).
Eurofer would be interested in exploring to what extent concrete commitments/guarantees
to pursue decarbonisation investments could be a condition towards maintaining the current
level of free al owances. It was very important to take into account the territorial dimension
and ensuring investments across al parts of the EU. Eurofer also stressed the need for the
right framework conditions and infrastructure, with a particular focus on hydrogen.
Eurofer explained the strong competitive pressure on the global steel market, with almost no
possibility to pass on costs due to stricter environmental regulation in Europe. They strongly
opposed the al egations by some civil society stakeholders that the sector was making
windfal profits through the EU ETS.
Eurofer also noted that the sector had an average profit margin of 1.75%. They stressed that
free al owance were necessary for EU exports to remain competitive on global markets,
especial y in absence of export rebates. While only around 15% of production was exported,
this amount was crucial to operate steel plants in a cost-effective way because of very high
fixed costs.
Eurofer reiterated its request for a European steel summit between the Commission
President and steel CEOs and argued that this could be an opportunity to further discussions
on possible commitments/guarantees linked to decarbonisation projects.