Green steel: CBAM and ETS - do their current designs aid EU climate ambitions?

The CBAM is intended to complement the EU Emissions Trading System (EU ETS) and level the playing field between EU and non-EU businesses. The EU ETS, which sets a cap on the amount of greenhouse gas emissions that can be released from industrial installations in certain sectors, works through a system of allowances that must be bought on the ETS trading market, though a certain number of free allowances is distributed to prevent carbon leakage. The CBAM will progressively become an alternative to this. Moreover, in the Commission's new proposal for a revised ETS, the number of free allowances for all sectors will decline over time, and for the CBAM sectors, the free allowances will gradually be phased out as from 2026.

An industry particularly susceptible to these mechanisms is that of steel, which has set out the ambition to reduce its CO2 emissions by 30% by 2030 compared to 2018 (= 55% compared to 1990). Currently, there are more than 50 steel projects that could be implemented at industrial scale by 2030 in order to achieve this ambitious objective. The estimated costs are 25 billion EUR Capex and 45 billion EUR Opex, plus 150 TWh of carbon-free electricity needed, including for hydrogen production, by 2030. The EU steel industry states it is willing to invest in order to implement these and other projects, with the support of EU and national programmes and EU legislation that allows a sustainable transition.