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2024 is coming to an end but our work for the year is not finished quite yet.
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Read on for a detailed analysis of what's wrong with current free allocation rules, how they need to change in 2024 and how you can help.
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If you have a question, comment, or want to alert us about an upcoming advocacy opportunity, please don’t hesitate to reach out: contact@sandbag.be
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Free allocation rules fall flat..again..
Sandbag has long campaigned for the revision of the Free Allocation Regulation. That revision has finally materialised but regrettably the revised draft continues to disincentivise the use of scrap in steelmaking by favouring the most carbon-intensive steel production methods.
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Sandbag, along with and 12 other organisations – representing important environmental NGOs, think tanks and the European recycling industry – have co-signed a letter addressed to Members of the European Parliament and Members of Coreper 1 in response to the European Commission’s draft revision of the Free Allocation Regulation (FAR).
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This letter criticises the proposed FAR for rewarding steel plants using transformed virgin ores (hot metal and direct reduced iron) with free emission permits and by doing so, penalising those using recycled scrap. This is in conflict with the EU climate and circularity goals. The letter calls for the Commission to stand by the political agreement reached during the ETS trilogues which states that the free allocation of emission allowances should be “independent of the feedstock or the type of production process.”
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The revision of the Free Allocation Regulation is the last chance to fix a broken system. The allocation method of free permits needs to –and still can – be fixed.
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Have your say on free allocation
The Commission has opened a 4-week public consultation on the revision of the Free Allocation Regulation ending on January 2nd. Unfortunately, as the timeline of this consultation clashed with COP28 and runs over the Christmas period, it is unlikely that the consultation will yield many responses.
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Sandbag has submitted its own proposal to the consultation. This proposal only affects the hot metal/DRI benchmark proposed by the Commission and would not change, on average, the number of free allowances received by steel plants. Our proposal targets integrated steel plants, for which free allowances would not be based on the volume of hot metal or DRI produced, but rather be allocated per tonne of flat steel produced. The aim is to create a notional product-based benchmark (that only applies to integrated steel plants) and to help restore a level playing field for all steelmaking routes. This addresses fair competition between feedstock and processes, while also tackling the primary source of emissions in steelmaking, i.e. the production of hot metal.
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We need your help to achieve a truly circular European steel sector. It takes five minutes to submit feedback on the revised FAR and it can have a large impact.
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Sandbag in the media
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If you would like more information on any of these topics, or to speak with a member of the Sandbag team, please send us an e-mail.
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What we're reading
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Upcoming
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31 December: deadline for the EU and the US to reach an agreement on the Global Arrangement for Sustainable Steel and Aluminium (GSA).
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1 January: Start of the Belgian presidency of the Council of the EU.
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2 January: Public consultation on the revision of the Free Allocation Regulation ends.
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23 January: Political trilogue on the Carbon Removals Certification Framework.
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6 February: European Commission to publish its Communication on the Industrial Carbon Management Strategy (cf. CCS/U strategy).
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8 February: End of first European Hydrogen Bank auction.
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19 February: Political trilogue on the Carbon Removals Certification Framework.
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Q1 2024: Final vote of the Parliament and the Council to formally adopt:
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1) The reform of the EU’s Electricity Market Design (EMD)
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2) The Ecodesign for Sustainable Products Regulation (ESPR)
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3) The revised Construction Products Regulation (CPR)
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4) The revised Industrial Emissions Directive (IED).
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About Sandbag
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Sandbag is a non-profit climate change think tank which uses data analysis to build evidence-based climate policy. We focus on EU policies such as the EU Emissions Trading Scheme and climate governance, and emissions reductions in industrial sectors.
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Want to support Sandbag in the fight against climate change?
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In this joint op-ed, first featured in Carbon Pulse, Sandbag policy officer Aymeric Amand and Carbon Market Watch policy expert Lidia Tamellini examine the revision of the Free Allocation Regulation. The EU Emissions Trading System (ETS) is one of the core EU instruments that will drive the decarbonisation of European industry and help achieve the transition to a net-zero …
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Sandbag and 12 other organisations – representing important environmental NGOs, think tanks and the European recycling industry – have co-signed a letter addressed to Members of the European Parliament and Members of Coreper 1 in response to the European Commission’s draft delegated act for the revision of the Free Allocation Regulation (FAR) under the EU Emissions Trading Scheme (ETS). The …
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Following the revision of the EU Emissions Trading System (ETS) Directive in April 2023, the European Commission was mandated to review the Free Allocation Regulation, which establishes the methodology that calculates the number of free emission allowances for sectors covered by the EU ETS. The revised ETS Directive, approved by the European Parliament and the European Council, stated that the …
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You can read all of our publications on our website here.
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