A coalition of businesses and organizations, including steelmakers GravitHy, SSAB, Outokumpu, Stegra and Hydnum Steel, has called for maintaining and strengthening the European Union’s Emissions Trading System (ETS), arguing that it remains the bloc’s most important tool for supporting industrial decarbonization and long-term competitiveness.
According to the group, the ETS has contributed to a 39 percent reduction in EU emissions between 1990 and 2024 while the EU economy expanded by 71 percent during the same period. The signatories also noted that carbon emissions from the EU power sector have fallen by around 60 percent since 1990, supported by greater investment in renewable and low-carbon energy sources and reduced reliance on fossil fuel imports.
Steel sector entering key investment cycle
The coalition stated that industrial decarbonization has progressed more unevenly, particularly in sectors that have benefited from extensive free emissions allocations. The signatories highlighted that the European steel industry is entering a major investment cycle as aging blast furnaces approach the end of their operating lives and low-carbon technologies such as hydrogen-based direct reduced iron (DRI) production and electric arc furnace (EAF) steelmaking move toward commercial deployment.
According to the statement, carbon pricing remains a critical factor in making near-zero-emission steel production competitive with conventional carbon-intensive steelmaking routes. The group warned that weakening the ETS could reduce incentives for industrial transformation and encourage continued investment in traditional blast furnace production.
Call for predictable carbon pricing beyond 2030
To support industrial decarbonization, the coalition called for maintaining a strong and predictable ETS framework beyond 2030. The signatories proposed preserving the current Linear Reduction Factor of 4.4 percent until at least 2035 and aligning the post-2035 emissions reduction pathway with the EU’s 2040 climate objectives.
They also emphasized the importance of maintaining the current design of the Market Stability Reserve (MSR), stating that the mechanism has successfully balanced the carbon market and should not be substantially modified in the near future.
Support for phase-out of free allowances
The coalition urged the EU to maintain the planned phase-out of free emissions allowances between 2026 and 2034. According to the signatories, completing the transition from free allocations to carbon pricing is necessary to stimulate investment in low-carbon industrial technologies and support the implementation of the Carbon Border Adjustment Mechanism (CBAM).
The group also called for a greater share of ETS auction revenues to be directed toward industrial decarbonization rather than general government budgets. In particular, the signatories advocated increased funding for initiatives such as the Innovation Fund and the proposed Industrial Decarbonization Bank to help finance clean technology and infrastructure projects.
According to the statement, maintaining a predictable carbon price, preserving the integrity of the ETS market, completing the phase-out of free allocations and reinvesting ETS revenues into industrial transformation are essential for ensuring that the ETS continues to support both decarbonization and industrial competitiveness in Europe.
