The EU Emissions Trading System (ETS) was built on a simple premise: put a price on carbon, make it rise over time, and investment into cleaner production becomes the rational choice., For steel, that means a scheduled phase-out of free allowances by 2034 – the point at which blast furnace production would become economically unviable. .
It’s working. Since 2005, the ETS has helped reduce emissions from high-carbon sectors by around 47%. But the signal only holds if policymakers hold firm – and it’s under threat due to sustained pressure from some MEPs and major steel producers who’ve invested heavily in extending the life of polluting blast furnaces. According to SteelWatch, those same producers have already received €25.7 billion in free ETS allowances, while only investing a fraction of that (€3.2 billion) in cutting emissions.
On 17 July, the European Commission faces a choice: give in to polluters' demands, or support the shift to green steel and keep European producers competitive in a world moving to cleaner production.
SteelZero members are comprised of major corporate steel buyers that commit to procuring 50% lower emission steel by 2030, and near-zero steel by 2050. Corporate steel buyers are clear: they need policy certainty to invest in cleaner steel. Engineering company SKF and Swedish carmaker Polestar warn that weakening the EU ETS risks slowing the transition by sending the wrong signal to the market and undermines existing cleaner buying commitments.
Sofie R. Cederberg, Director Group Sustainabilty at SKF, said:
“A strong and predictable EU ETS is fundamental for enabling the long-term industrial transformation that Europe needs. For SKF, clear and stable carbon pricing is essential to underpin investments in low-emission materials such as steel and to align our value chain with our net-zero ambitions. Weakening the system risks undermining both investment certainty and the competitiveness of companies that have already committed to the transition.”
Fredrika Klarén, Head of Sustainability at Polestar, said:
“For Polestar, regulatory consistency is essential to enabling long-term procurement and investment decisions. A strong and predictable EU ETS is a key enabler for scaling low‑carbon materials like green steel, that the industry needs. Without a robust carbon price signal, investments in cleaner production pathways risk slowing down.”
End free allowances in 2034 – no extensions, no dilutions. Extending the timeline removes the price signal that makes green investment rational. The direction of travel has been clear since 2005. The transition needs certainty, not more delay.
Maintain the ETS cap trajectory as legislated. The phase-out of free allowances must proceed on the agreed schedule. Any weakening directly extends the economics of blast furnace production.
Give steel buyers a seat at the table. The conversation on ETS reform has been dominated by producers. But buyers ready to purchase green steel at scale deserve to be heard.
Why does this matter?
"Every free allowance handed out today is effectively a subsidy for business as usual. Buyers can only justify paying a premium for lower-carbon steel if they trust the market will eventually catch up with them – weaken the ETS now, and you remove the one incentive that's actually pulling this industry forward.”
– Andrew Forth, Head of Policy and Advocacy, Climate Group
If your organisation buys steel and wants to see the EU ETS held firm, join the companies already committed to driving the green steel transition.