Three of Europe’s largest steelmakers, ArcelorMittal Europe, thyssenkrupp Steel, and voestalpine, announced the publication of an open letter calling on European lawmakers to pause increasing carbon pricing under the EU Emissions Trading System (ETS), warning that the current trajectory of the scheme “risks destroying Europe’s industrial base.”
While the companies – which collectively account for approximately 60% of Europe’s integrated steel production – expressed support for Europe’s climate goals, and said that they each have committed to decarbonizing their own operation, they warned that with economic and technological conditions to enable industrial decarbonization at scale not yet in place, the ETS will raise costs and harm competitiveness, estimating a 30% – 40% decline in EU manufacturing as a result.
Marie Jaroni, CEO of thyssenkrupp Steel said:
“The ETS needs a reality check. It does not reflect the current state of Europe’s industry, where competitiveness and transformation are becoming increasingly difficult to reconcile. That is why we need a cost pause in the ETS to safeguard the transformation and ensure that ‘first movers’ like us are not put at a disadvantage.”
The Emissions Trading System (ETS) is the EU’s cap and trade carbon pricing mechanism. Established in 2005, the ETS puts a price on carbon emissions for key GHG intensive sectors, including electricity and heat generation, oil refineries, steel, cement, paper, chemicals, and commercial aviation, among others. The system is designed to reduce emissions over time by reducing the “cap,” or the limit of emissions by sectors under the ETS annually, which effectively tends to raise the price of emissions as well.
As Europe has faced rising energy prices, several member states have recently called on the EU Commission to review the ETS to help reduce pressure on industry. In March, EU Commission President Ursula von der Leyen pledged to introduce near-term measures to revise the ETS, with a comprehensive review of the ETS planned for July 2026.
While committing to update the ETS, however, von der Leyen has defended the system as an effective tool to drive reduced dependence on imported fossil fuels, accelerate the shift to cleaner energy sources and fund investments in decarbonization-focused technologies. The EU Commission has credited the ETS as a driving factor in the EU’s 39% reduction in emissions since 2019, as the economy grew by 71%.
In the new letter, however, the steelmakers said that the conditions that have made the ETS successful in cutting emissions so far in the power sector are not yet in place for energy intensive industries such as steel, noting that “key enablers for economic decarbonisation remain insufficiently developed or unavailable at scale, including competitive electricity prices, affordable green hydrogen, Carbon Contracts for Difference, carbon capture and storage, and lead markets for low carbon steel.”
According to the companies, the cost of producing steel would rise by an estimated 50% by the early 2030s under the ETS’ current trajectory, significantly damaging the sectors’ competitiveness relative to regions not subject to an equivalent carbon pricing system, adding that “without reforms to the ETS, the EU could face a 30–40% decline in steel intensive manufacturing activity, putting up to 5 million jobs at risk across the value chain.”
In the letter, the companies called for a series of actions to adapt the ETS “to reflect the realities of industrial transformation,” including a temporary pause in ETS cost escalation at the current level “until the key enablers of economically viable decarbonisation are in place,” ensuring that ETS revenues are directed towards industrial decarbonization and that a framework is in place to support first-movers to enable decarbonization projects to proceed with confidence, and “a balanced approach to import and export competitiveness, addressing the unintended consequences of the current system.”
Lakshmi Mittal, executive chairman of ArcelorMittal, said:
“A future for the ETS that incentivises decarbonisation without compromising competitiveness must be found. It is not an easy problem to solve, but reform of the ETS is essential and we applaud Europe’s policymakers for putting the topic back on the agenda. The choice they face is not between climate ambition and competitiveness. The choice is between a climate strategy that strengthens Europe’s resilience and economic security, and one that hollows it out”.
