Three of Europe’s largest steelmakers are calling for a rethink of the European Union’s Emissions Trading System (ETS), warning that the industry could face severe consequences if free carbon allowances are phased out before key technologies become commercially viable.
ArcelorMittal, Thyssenkrupp Steel and Austria’s Voestalpine have jointly called for a temporary pause to the next stage of the ETS. According to the companies, the conditions required for the transition envisioned by the EU have yet to materialise.
Under current plans, free emissions allowances for heavy industry will gradually disappear by 2034. At the same time, the Carbon Border Adjustment Mechanism (CBAM) is being introduced to protect European producers from imports originating in countries with less stringent climate regulations.
However, the steelmakers argue that the technical and economic foundations needed to reduce emissions are still lacking.
– 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, Thyssenkrupp Steel Europe CEO Marie Jaroni said in a statement.
– That is why we need a pause in rising ETS costs to safeguard the transformation and ensure that first movers are not put at a disadvantage.
Hydrogen projects have slowed
According to the companies, access to affordable green hydrogen, competitive electricity prices, carbon capture, carbon storage and various support mechanisms are all essential if the steel sector is to reduce emissions.
The problem, they argue, is that many of these prerequisites either do not exist or have not been developed on a sufficiently large scale.
Direct reduced iron produced with green hydrogen is widely viewed as the most promising route to near-zero-emission steel production. But progress has been slower than many expected.
Thyssenkrupp is currently constructing a direct reduction facility in Duisburg, Germany, at a cost of around €3 billion. However, the company acknowledged last year that it had abandoned plans to procure hydrogen because costs had become too high.
ArcelorMittal went further and cancelled two hydrogen-based steel projects in Germany in 2025, arguing that the economics no longer worked even with billions of euros in public subsidies.
Voestalpine is also building a hydrogen-based iron production facility, although it will initially require only limited volumes of hydrogen, equivalent to output from a 6 MW electrolyser.
Among the few large-scale projects moving ahead is Swedish company Stegra in Boden. The plant under construction will include electrolysers with a combined capacity of 740 MW and aims to produce 2.5 million tonnes of green steel annually.
German steel producer Salzgitter is installing electrolysers totalling 100 MW and has secured an agreement for deliveries of 10,000 tonnes of hydrogen annually from 2030.
Industry fears production losses
The three steelmakers warn that Europe’s steel industry could shrink by 30 to 40 percent if costs continue to rise before the necessary technologies and infrastructure become available.
They argue that revenues from the ETS should be redirected more aggressively towards industrial decarbonisation efforts.
The companies also point out that CBAM mainly protects raw steel products, while manufactured goods containing large amounts of steel could still gain a competitive advantage through imports.
At the same time, concerns are growing that constant changes to regulations could discourage investment. Speaking recently during a Hydrogen Insight conference, Yara’s head of certification and regulatory affairs, Vibeke Rasmussen, warned that ongoing discussions around ETS reform and possible changes to CBAM do not help industrial decarbonisation efforts.
Meanwhile, the EU is working on its Industrial Accelerator Act, which aims to establish lead markets for low-carbon steel. However, details of how such a framework will operate have yet to be defined.
Source: Hydrogen Insight.
Fact check:
The EU Emissions Trading System was introduced in 2005 and has significantly reduced emissions from the power sector. Progress in the steel industry has been much slower. Several hydrogen-based projects have been delayed or cancelled because of high costs, while hydrogen production and carbon capture infrastructure remain at an early stage of development.
