EU decarbonisation policies could cost UK steel £300m a year
The EU emissions trading scheme (ETS) could cost the UK steel sector more than £300m a year by 2030, according to a new report from the industry.
Trade body UK Steel and trade union Community have issued a joint warning about the need for reform of decarbonisation policies, particularly the EU’s flagship policy, the ETS.
If left unchanged, the EU ETS will reportedly add nearly £30 a tonne to average steel production costs by 2030.
“This could be disastrous to an industry in which contracts can be won or lost on as little as £5 per tonne of steel,” said the report. “At today’s production levels, it would cost the UK sector as a whole more than £300 million a year.”
The European Commission will publish this week a series of reform proposals for the ETS, and the UK steel industry has laid out its own series of recommendation, to help “level the playing field”.
It calls for small emitters to be removed from ETS entirely, with opt-out options for sites with annual emissions below 50,000 tonnes CO2e a year.
The paper also calls for more innovation funding and an ETS innovation fund that “really works for industry”.
UK Steel director Gareth Stace said: “The steel sector employs around 30,000 people, many in areas of relatively high unemployment, and contributes more than £45bn to the UK economy. And yet it is a sector under extreme stress.
“Surplus production capacity in the global market, unfair trade practices, a strong pound, high energy costs and regulatory pressures such as the EU Emissions Trading System are all making it hard for UK plants to compete.”
In an interview with edie earlier this year, EEF’s Susanne Baker, warned that large UK manufacturers could be forced to move their operations overseas if decarbonisation continued to be a competitive disadvantage in the UK.
Roy Rickhuss, the general secretary of Community, reinforced that opinion, adding: “This is about ensuring the UK Steel Industry is helped to decarbonise in a way that ensures its future and the many thousands of valuable jobs it provides, rather than being pushed overseas.
“In its current guise, the EU Emissions Trading System is having some serious unintended consequences. It is unwittingly contributing to the headwinds holding back the UK steel sector and we urgently want the European Commission to understand this and to work with us to find a better way forward.”
Conversely, critics have argued the steel industry is trying to avoid the main purpose of the ETS, which is intended to encourage heavy manufacturers and power generators to reduce emisions.
A report from the Sandbag think-tank last year found that steel firms like ArcelorMittal and Tata were some of the biggest hoarders of carbon permits, in an attempt to insulate themselves from the need to cut emissions.
In related news, steel giant ArcelorMittal announced earlier this week that it was building an €87m commercial-scale biofuel plant, to help recapture the heat from its manufacturing process.