Late April and early May 2021 have seen record rises in the price of EU emission Allowances (EUAs), reaching €50 per tonne of CO2. As recently as mid-2017 it was around €5, so this new high represents an order of magnitude difference to three years ago, and a doubling compared to just six months ago.

In the past, the EU ETS carbon price was relatively low mainly due to the economic and environmental impact of the financial and economic crisis. EUROFER had always expressed that the problem with the EU ETS costs would come with their expected rise in price if there were no comparable carbon costs and constraints on key competitors – as it is still the case.  But it has come much earlier than anticipated, driven not only by the decreasing number of CO2 certificates but also by professional speculators pushing for a carbon price rally.

Now, the increasing price to record levels presents a set of problems. One is our global competitors do not have those carbon constraints. The second it makes it much more difficult to invest the new technologies that will be needed to make the low carbon transition possible. The successful deployment of such technologies requires four key enabling conditions: (1) access to competitive low carbon energy, (2) funding support, (3) creation of lead markets for low carbon products, (4) effective carbon leakage measures.

As the Commission is finalising its fit for 55% package (expected to be presented on 14 July), we are entering the most critical phase where political decisions are being taken on the question whether these enabling conditions will be delivered or not by the regulatory framework.

The EU ETS is a cornerstone of the EU’s climate policy, and EUROFER has worked hard to support relevant revisions to ensure its functioning. However, Europe needs to ensure that third country competitors also face similar cost constraints.

The Commission is currently working on the revision of the EU ETS and a proposal for Carbon Border Adjustment Mechanism – having just launched its updated industrial strategy. If any of these policies are to be credible, they must help reduce emissions and improve industrial competitiveness overall. The details of the proposals will be decisive to understanding whether our industry will get closer to - or further away from – a level playing field with our global competitors.

To EUROFER, any cut in the current carbon leakage measures would be irresponsible, especially given the current situation. The sector is still reeling from the COVID crisis and is embarking on a large number of promising – but costly – green innovation projects. We hope that EU policy makers take the days after the publication of the updated industrial strategy as an opportunity to reflect, once more, on the most effective balance of carbon costs and global competitiveness.