Weakening the EU's emissions trading system (ETS) in order to ease pressure on industry would undermine investment certainty rather than enhance competitiveness, and this could already lead capital markets and financiers to hesitate to participate in decarbonization investments, according to a coalition of more than 100 companies and investors.
Instead, the upcoming ETS reform should ensure that ETS revenues are redistributed by member states to increase the financial attractiveness of decarbonization projects in industrial sectors, says the coalition, which includes decarbonization pioneers SSAB, Outokumpu, Hydnum, Stegra and GravitHy.
"Revenues should be used to accelerate industrial electrification by increasing access to low-carbon energy and supporting breakthrough technologies that strengthen the EU's industrial base and strategic autonomy," says the open letter, which was reviewed by Callanish, President of the European Commission Ursula von der Leyen and the European Council. President Antonio Costa.
In recent months, there have been increasing calls in the EU industry to postpone the phase-out of free ETS emissions in order to ease the cost burden of blast furnace steel mills, which include the Italian Steel Association Federacciai, voestalpine and Trinecke Zelezarny. The phase-out began on January 1, simultaneously with the phased introduction of CBAM.
These calls are a "misdiagnosis of the problem," instead of "focusing on the structural causes of economic erosion – higher energy prices related to fossil fuels, unfair competition caused by global overcapacity in certain sectors, insufficient integration of the single market," the coalition notes.
Weakening the ETS "will prioritize existence over transformation, punish the pioneers who developed business cases and invested in decarbonization, and leave the EU without a serious action plan to compete in new industries," the document says.
The upcoming revision of the ETS provides an opportunity for improvement, but the trajectory must remain unchanged. "Regulatory stability and clarity about long-term prospects will be crucial to attract investment to Europe," the letter says.
Continued implementation of reliable and affordable sources of clean energy, combined with long-term investments in power grids, flexibility, efficiency, and storage, will be crucial, enabling large-scale electrification. The letter notes that the possibility should be considered.
