
The European Steel Association (EUROFER) is calling for urgent enhancements and the expedited implementation of the Carbon Border Adjustment Mechanism (CBAM). This mechanism, slated to launch in 2026, is seen as crucial for addressing carbon leakage and supporting decarbonization efforts in Europe’s steel industry.
Challenges Facing European Steelmakers
Currently, over 25 million tons of steel—roughly 20% of the EU’s total production—are imported annually from non-EU countries without any carbon-related costs. In contrast, EU steelmakers have been subject to the EU Emissions Trading System (ETS) since its inception. With carbon prices now reaching approximately €75 per ton of CO2, this creates a significant competitive disadvantage for European producers.
EUROFER highlights the need for CBAM to prevent carbon leakage and incentivize investment in low-carbon steel technologies. However, the association stresses that CBAM, as a first-of-its-kind measure, poses significant risks due to the steel industry’s complexity. This includes diverse product types, varying carbon intensities in production technologies, and intricate global trade flows.
Key Recommendations for CBAM Improvements
To ensure the effectiveness of CBAM, EUROFER has proposed several critical changes to the current framework:
- Preserving Export Competitiveness: Structural measures are needed to protect European steel exports and ensure their global competitiveness.
- Stricter Anti-Circumvention Rules: Rules should be introduced to prevent practices such as resource shuffling, where carbon-intensive production is shifted outside the EU.
- Expanding CBAM Scope: The mechanism should cover downstream sectors that rely heavily on metal-intensive products.
EUROFER also suggests adjustments to CBAM’s design elements, such as hard defaults and free allocation adjustments, to maintain the mechanism’s environmental integrity. Without these changes, EUROFER warns that the phase-out of free ETS allowances, combined with the implementation of CBAM, could lead to increased production offshoring and inadequate protection against carbon leakage.
Simplification Without Compromising Effectiveness
EUROFER emphasizes the importance of minimizing administrative burdens while maintaining CBAM’s effectiveness. Proposed measures include:
- Exempting European products exported outside the EU, processed abroad, and re-imported as CBAM-regulated goods from reporting obligations.
- Strengthening monitoring to prevent circumvention practices.
- Converting the current minimum reporting threshold of €150 into a weight-based threshold (e.g., 1 ton) to reduce unnecessary reporting for small shipments.
However, EUROFER cautions that simplification should not compromise CBAM’s ability to address carbon leakage, even for smaller companies.
Broader Policy Considerations
The European People’s Party (EPP) has also called for revisions to the EU’s climate and economic policies to better support its industries. Their proposals include allocating more ETS funds to green technologies and revisiting the CBAM framework ahead of its 2026 launch.
Urgency of Action
EUROFER stresses that the proposed changes must be implemented this year, well ahead of CBAM’s final roll-out in 2026. This will ensure the mechanism provides adequate protection against carbon leakage while fostering decarbonization in Europe’s steel industry.
As the EU moves closer to the implementation of CBAM, finding the right balance between competitiveness, environmental integrity, and administrative efficiency remains a top priority for stakeholders.