German steelmaker Thyssenkrupp calls for “urgent adjustments” to EU emissions trading

The European Union’s Emissions Trading System (EU ETS) “urgently needs to be adjusted” to prevent industry in the union from falling behind global competitors as the momentum of the green transition has slowed, said German steelmaker Thyssenkrupp. The company argued that conventional production of materials like steel would have to remain financially viable, as “today’s revenues fund tomorrow’s decarbonisation investments.”

“Without adjustments, the ETS could exacerbate the decline of EU industrial competitiveness, leading to further deindustrialisation rather than the intended decarbonisation,” the company wrote in July as part of its feedback to the public consultation on the EU’s upcoming emissions trading system review. Thyssenkrupp argued that with an increasingly tight emissions cap and the imminent phase-out of free allocations, the system was entering a critical phase for the transformation of Europe’s energy-intensive industries to climate neutrality.

The EU ETS, which puts a price on climate change-inducing CO2 emissions, has been a key driver of decarbonisation in energy and industry for years, and the EU is setting up a similar scheme called ETS II for the transport and buildings sectors. Low prices for CO2 allowances meant the ETS was long considered a toothless mechanism for climate action, but reforms have driven up the price, giving companies more incentives to reduce fossil fuel consumption.

Thyssenkrupp called for a slower and non-linear reduction of allowances in the system until 2050, “aligning more closely with the actual pace of industrial transformation and realistic levels of residual emissions.” Under current rules, the emissions cap is set to reach zero by around 2039. The company also wants free allocations – which are being phased out as the EU has introduced its carbon border tax – to be extended beyond 2040.

Massive investments are needed to get Germany’s manufacturing sector on track for the emission cuts necessary to reach climate targets. Manufacturing could soon overtake electricity generation as the country’s sector with the highest CO2 output. While emissions have dropped rapidly in the energy sector in recent years as renewables increasingly edge out coal, they have decreased relatively slowly in industry. The sector has criticised uncertainty from government actions and called for improving tax incentives for investments and regulations, infrastructure improvements, and lower energy prices.