Germany to protect steel industry with lower electricity prices, push for EU carbon border tariff reform
Clean Energy Wire
Germany’s government has said it will protect the country’s steel industry by ensuring lower electricity prices and advocating for improvements to EU measures, such as changes to the union’s carbon border tariff system.
“We will make every effort to reduce energy prices in Germany,” said chancellor Friedrich Merz after a meeting with steel sector representatives in Berlin. “Without an effective reduction in electricity prices, this industry is not viable.” Electricity price subsidies in the form of an “industry power price” would provide relief for three years from 2026. Merz said there were good prospects for the EU to approve the state aid scheme soon.
The German government is in the final stage of negotiations with the European Commission concerning the details of electricity price incentives for industrial companies, and expects the system to start in January 2026. But industry sources told Spiegel magazine they didn't expect the steel sector to benefit from the planned industry power price because energy-intensive companies already receive support via the so-called power price compensation, which provides relief from emission trading costs.
The government also said it would push for action at EU level, including trade protection instruments against dumping or subsidies to reduce current import volumes, welcoming related EU proposals. In addition, Germany advocates reforming the Carbon Border Adjustment Mechanism (CBAM), which requires importers in certain sectors to pay when their products have a higher carbon footprint than EU-made goods.
The government is calling for an extension of the scheme to downstream steel products. If effective carbon leakage protection still cannot be achieved, the EU should extend the free allocation of emissions allowances to the steel sector beyond existing plans, currently set to end in 2034. Germany also advocates for a slower reduction of the emissions cap in the Emissions Trading System for energy and industry (EU ETS 1) to ensure that allowances would continue to be issued beyond 2039.
Sustainability as an economic advantage would play a key role in a German steel strategy, said finance minister Lars Klingbeil. “We want to place a clear focus on climate-friendly, high-quality steel from Germany and Europe.” The government would continue to support the transition to clean steel through several programmes, such as the climate contracts.
