ArcelorMittal, Thyssenkrupp Steel and Voestalpine, three of Europe’s leading steel producers, which together account for approximately 60 percent of integrated steel production in the European Union, have issued a joint appeal for urgent reform of the EU ETS system. In an article published in the Financial Times, ArcelorMittal Executive Chairman Lakshmi Mittal presented the companies’ position, warning that without the necessary adjustments, the current decarbonisation path threatens to destroy the European steel industry.
The EU ETS is the European Union’s emissions trading system, launched in 2005. It operates on a „cap and trade” principle – it sets a maximum emission limit for the sectors covered, and companies must hold allowances for each tonne of CO2 they emit. Allowances are allocated through auctions or granted free of charge (free allocations). The system covers approximately 10,000 installations in the EU, including power plants, refineries and steel mills. Since 2020, allowance prices have risen steadily, reaching around €95-100 per tonne of CO2 in 2026.
The steel producers emphasise that although the EU ETS has effectively contributed to emission reductions in the power sector – by about 49 percent between 2005 and 2023 – it still does not provide a realistic path to transformation for energy‑intensive sectors such as steelmaking. Key factors that would enable economically viable decarbonisation remain underdeveloped or unavailable on a large scale. These include competitive electricity prices, affordable green hydrogen, carbon contracts for difference (CCfD), carbon capture and storage (CCS) technologies, and lead markets for low‑carbon steel.
Under the current EU ETS, steel production costs in the European Union are expected to rise by about 50 percent after 2030. Imports of high‑carbon steel products from outside the EU do not face the same burden of purchasing emission allowances, and EU producers receive no compensation for exports. As a result, the consequences of such a sharp increase in ETS costs will be severe for both European steelmaking and the entire supply chain.
The three companies that have called for effective EU ETS reform estimate that without such action, the European Union could see a 30‑40 percent decline in production in steel‑intensive sectors, risking the loss of up to 5 million jobs across the entire value chain.
– The ETS needs to confront reality. It does not reflect the current situation of European industry, where reconciling competitiveness with transformation is becoming increasingly difficult. That is why we need a pause in the rise of ETS costs to safeguard the transformation process and ensure that pioneers like us are not put at a disadvantage. Reform must help effectively link climate protection with industrial development – for Europe’s future – said Marie Jaroni, Chief Executive Officer of Thyssenkrupp Steel.
What steel producers are proposing?
ArcelorMittal, Thyssenkrupp Steel and Voestalpine stress that they fully support Europe’s climate goals and want to decarbonise. At the same time, they note that the ETS must be adjusted to reflect industry’s real capacity for transformation. The companies jointly call for a temporary halt to the rise in ETS costs – maintaining the current level of charges until the key conditions for economically viable decarbonisation are met. They also call for support frameworks for transformation leaders, so that pioneering decarbonisation projects can be carried out with certainty and stability. ETS revenues should be channelled into industrial decarbonisation to genuinely accelerate the transition. They also expect a balanced approach to import and export competitiveness that eliminates unintended consequences of the current system.
– Voestalpine is making significant investments under its greentec steel programme and will significantly reduce emissions in the coming years. However, in a difficult economic environment, the gradual phase‑out of free CO2 allowances is already consuming financial resources needed for the decisive phase of the transformation. A pause in the ETS system, until favourable conditions are established, is essential to secure these investments and enable further decarbonisation efforts – said Herbert Eibensteiner, Chief Executive Officer of Voestalpine AG.
CBAM and TRQ – important but insufficient steps
The introduction of the EU’s Carbon Border Adjustment Mechanism (CBAM) and the upcoming implementation of tariff‑rate quotas (TRQs) are, in the steel producers’ view, important steps towards levelling the playing field. CBAM was adopted in 2023 and is set to become fully operational from 2026, imposing charges on imports of products from energy‑intensive sectors, including steel, that do not face the same emission costs in their country of origin. TRQs are a system of tariff‑rate quotas designed to limit imports of steel from outside the EU at preferential rates.
However, the companies stress that ETS reform is the missing piece of the puzzle – essential if Europe is to decarbonise effectively while maintaining a strong industrial base. Without it, EU steel producers will continue to lose competitiveness against imports from China, India and other countries that do not face the same emission costs.
– We need to develop a new shape for the ETS that encourages decarbonisation without undermining the competitiveness of EU steel producers. This is not an easy problem to solve, but ETS reform is necessary, and we appreciate that European policymakers have once again placed this issue on the agenda. The choice they face is not a dilemma between „climate ambition or competitiveness” but a choice between a climate strategy that strengthens Europe’s economic resilience and security and one that weakens them – concluded Lakshmi Mittal, Executive Chairman of ArcelorMittal.
European steel industry in numbers
Europe produces around 130‑140 million tonnes of steel annually, accounting for approximately 8 percent of global production. The main producers in the EU are Germany (around 40 million tonnes), Italy (20 million tonnes), France (12 million tonnes) and Spain (10 million tonnes). ArcelorMittal, Thyssenkrupp Steel and Voestalpine are key players in this segment. ArcelorMittal is the world’s largest steel producer, headquartered in Luxembourg, formed in 2006 through the merger of Mittal Steel and Arcelor. Thyssenkrupp Steel is a German producer based in Duisburg, part of the Thyssenkrupp group. Voestalpine is an Austrian company headquartered in Linz, specialising in high‑quality steels for the automotive and railway industries.
The cost of purchasing CO2 emission allowances for steel mills in 2025 averaged around €600‑700 million for large producers such as ArcelorMittal. Free allowances, which have hitherto protected the steel industry from full costs, are being gradually phased out. Under current rules, the number of free allowances for the steel sector will be significantly reduced by 2030 and completely phased out by 2034. By comparison, in China, which produces more than half of the world’s steel (around 1.1 billion tonnes annually), the ETS is still in its infancy and covers only part of the sector, while allowance prices are several times lower – around 30‑40 yuan per tonne of CO2 (approx. €4‑5).
Impact on supply chains and jobs
The steel sector in the EU directly employs around 300,000‑350,000 people in mills and processing plants. Across the entire value chain, including transport, storage, processing and dependent industries (automotive, construction, machinery), employment reaches around 5 million people. The steel producers warn that a sharp rise in ETS costs without adequate safeguards could lead to the closure of some production capacity in Europe and the relocation of production to countries with lower emission costs.
Thyssenkrupp Steel announced in 2025 a €2 billion investment in a direct reduction plant using hydrogen in Duisburg, which is expected to cut CO2 emissions by 2.5 million tonnes annually. Voestalpine is implementing its greentec steel programme in Linz, which includes modernisation of electric furnaces and CCS installations. ArcelorMittal is investing in DRI technologies at its plants in Spain, Germany and France.
Fot. Unsplash.
