Europe’s leading steel producers have issued a clear warning that the continent’s industrial decarbonisation ambitions depend on maintaining a predictable EU Emissions Trading System (ETS1) and reinforcing the Carbon Border Adjustment Mechanism (CBAM). Without a stable carbon pricing framework and stronger border protections, the business case for investing billions of euros in low-emission steel production could rapidly weaken.
In a joint declaration presented at the European Parliament on June 30, 2026, Outokumpu, SSAB, Salzgitter, Saarstahl, Dillinger and SHS – Stahl-Holding-Saar confirmed plans to invest more than €10 billion in cleaner steelmaking technologies and modern production facilities across Europe. However, the companies stressed that these investments require long-term regulatory certainty, warning that weakening the carbon market would reward companies that delayed decarbonisation while undermining businesses that invested early.
Steelmakers Want ETS Rules Preserved Until 2035
At the heart of the proposal is the industry’s call to maintain the ETS1 Linear Reduction Factor at 4.4% until at least 2035, with future reforms aligned to the EU’s 2040 climate targets.
The companies also urged policymakers to preserve the current CBAM implementation schedule, maintain the existing free allocation phase-out, and protect the Market Stability Reserve, which plays a crucial role in balancing the carbon market. For steelmakers investing in electric arc furnaces (EAFs), hydrogen-ready direct reduced iron (DRI) plants, energy-efficiency upgrades, and large-scale facility modernisation, predictable carbon pricing is essential. These projects involve multi-billion-euro investments with operational lifespans measured in decades, making policy stability a critical factor for investment decisions.
Carbon Pricing Has Become an Investment Issue
The debate surrounding the EU carbon market is no longer solely about environmental policy. It has evolved into a question of industrial competitiveness and capital allocation.
Steel companies argue that investment decisions depend on several interconnected factors, including:
- Long-term carbon price certainty
- Demand for low-carbon steel
- Affordable electricity
- Reliable renewable energy supplies
- Grid infrastructure
- Protection against carbon-intensive imports
According to the companies, Europe’s largest competitive disadvantages stem from high electricity prices, continued dependence on fossil fuels, infrastructure bottlenecks, and global steel overcapacity, rather than from carbon pricing itself.
CBAM Becomes a Critical Shield Against Carbon Leakage
The industry also highlighted the growing importance of CBAM, which entered its definitive phase in 2026 following the transition period from 2023 to 2025. The mechanism applies carbon pricing to imports of iron and steel, aluminium, cement, fertilisers, electricity and hydrogen, requiring importers above the 50-tonne threshold to obtain authorised CBAM status, purchase CBAM certificates, and declare verified embedded emissions.
While supporting the mechanism, steelmakers warned that CBAM still contains significant loopholes that could undermine its effectiveness.
Their priorities include:
- Expanding CBAM to downstream steel-intensive products
- Preventing circumvention before it becomes widespread
- Creating a permanent export solution for EU producers
Downstream Products Represent the Biggest Gap
One of the industry’s main concerns involves downstream manufactured goods.
Without broader CBAM coverage, production could shift from primary steel—which falls under the mechanism—to finished products such as machinery, industrial components, household appliances, construction products and metal-intensive equipment, many of which currently face less stringent carbon requirements. This would allow imported finished products to avoid carbon costs while European manufacturers continue paying significantly higher compliance expenses.
Industrial Policy and Climate Policy Are Becoming Interconnected
The statement represents more than a traditional industry lobbying effort. European steelmakers argue that carbon pricing is now fundamental to preserving industrial production, employment and investment within Europe. Weakening the ETS after companies have already committed billions to cleaner production would damage investor confidence and make future industrial projects substantially more difficult to approve.
Although lower carbon prices could provide temporary political relief, they would simultaneously reduce the financial attractiveness of low-emission steel production.
Steel Procurement Is Becoming a Carbon Decision
The evolving regulatory framework is also transforming procurement strategies across Europe.
Manufacturers increasingly evaluate steel suppliers based on three equally important criteria:
- The market price of steel
- The product’s embedded carbon emissions
- The regulatory carbon costs associated with imports
A strong and credible ETS-CBAM framework enables buyers to compare European low-emission steel with imported materials backed by verified emissions data while preparing for future CBAM expansion into downstream products.
Exporters Must Prepare for More Detailed Carbon Reporting
For producers outside the European Union—including exporters from the Western Balkans, Turkey, and neighbouring countries—the message is becoming increasingly clear.
Future access to European supply chains will require far more than annual emissions reporting.
Companies will increasingly need:
- Plant-level embedded emissions data
- Product-specific emissions calculations
- Precursor material tracking
- Electricity sourcing documentation
- Robust monitoring, reporting and verification (MRV) systems
- Evidence of domestic carbon pricing where applicable
- Comprehensive audit trails
Businesses capable of supplying accurate, independently verified emissions data will enjoy a significant competitive advantage over companies relying on generic estimates or incomplete documentation.
Export Competitiveness Remains Unresolved
One of the industry’s biggest concerns is the absence of a permanent solution for EU steel exports. European producers continue paying carbon costs when competing in international markets where many rivals face no equivalent obligations.
Without an effective export mechanism, investments in low-carbon steel become heavily dependent on demand within the EU and customers willing to pay a premium for greener products—potentially limiting market growth precisely when production volumes must expand.
Recycling ETS Revenues Could Accelerate Decarbonisation
The steelmakers also called for ETS revenues to be redirected toward industrial decarbonisation projects.
Modernising Europe’s steel industry requires enormous capital investment.
For example:
- Electric arc furnaces require high-quality scrap supplies, stable electricity and stronger grid infrastructure.
- Hydrogen-based DRI plants depend on hydrogen production, storage and transportation networks.
- Integrated steelworks modernisation requires advanced technology, lengthy permitting procedures and extended construction timelines.
Redirecting ETS revenues back into CBAM sectors would help reduce financing gaps while maintaining the carbon price signal necessary to encourage long-term investment.
Implications for Serbia and Southeast Europe
The evolving ETS-CBAM framework carries significant implications for Serbia and the wider Southeast European (SEE) region.
Companies exporting steel, aluminium products, electricity-intensive materials, or downstream manufactured goods into the European Union will increasingly compete based on both carbon performance and data transparency. Energy suppliers also stand to benefit, as renewable electricity, Guarantees of Origin, advanced metering systems, and CBAM-ready documentation become increasingly valuable elements of industrial supply contracts.
Carbon Compliance Is Becoming Part of Corporate Due Diligence
CBAM is rapidly evolving beyond a customs measure into a broader system of industrial due diligence.
Importers will require more comprehensive supplier disclosures, financial institutions will increasingly evaluate carbon-cost exposure, while buyers are expected to negotiate contractual rights covering emissions data, verification procedures and liability for inaccurate CBAM declarations.
Engineering firms and technical advisers will also play a growing role by integrating manufacturing processes, energy sourcing, metering, ERP systems, and EU reporting requirements into a single, verifiable compliance framework.
Europe’s Green Steel Transition Faces a Defining Test
Ultimately, the steel industry’s message extends far beyond climate policy.
The companies argue that more than €10 billion in announced low-carbon investments depends on maintaining a stable ETS, strengthening CBAM, preventing carbon leakage, introducing an effective export mechanism, and recycling carbon market revenues into industrial transformation. As Europe accelerates its transition toward cleaner manufacturing, policymakers face a defining challenge: ensuring climate policy remains strong enough to drive investment while providing sufficient protection for companies that choose to decarbonise first.