2nd ETS trilogue: EU institutions agreed on almost nothing, except on perpetuating free allocation for the steel giants

The second ETS trilogue took place last week on October 11th.

Tabled proposals on benchmarks regarding the steel sector were disappointing. The Council and Parliament proposals were heavily influenced by lobbyists: the first included an exception in 2026-2030 for the “hot metal” benchmark to be updated by the change of benchmark definitions and the second one excluded the data of the three least emission intensive installations altogether from the benchmark calculation. On Monday last week, trilogue negotiators agreed to keep the Council’s proposal.

Although this first could be the lesser of two evils, it is worth mentioning that this wording perpetuates the existence of the “hot metal” benchmark (for the blast furnace route). Using process-based benchmarks means that blast furnaces receive between 7 and 10 times more allowances than the electric arc furnaces route, thereby generating perverse incentives against this less-polluting route.

Steel should have only one benchmark, otherwise there will be no incentive for companies to shift away from blast furnaces to EAFs. Rapporteur Peter Liese mentioned maintaining the rules for the hot metal benchmark was a success, but how will this statu quo deliver different results? While in North America 70% of steelmaking is EAF-based, In Europe is only 40% according to our steel report.

Federico Sibaja, Sandbag’s Policy Officer comments:

“The preliminary agreements on the steel and hydrogen benchmarks are discouraging and are in complete contradiction with our recommendations. Using a process-based benchmark is a direct incentive against circular steel, as only EAFs can be fed on up to 100% scrap steel as discussed in our steel report.

Photo by Anne Nygård on Unsplash