Industry body and trade union warn that emissions trading scheme could cost UK steel sector over £300 million a year

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UK Steel, the trade body, and Community, the largest trade union for the steel sector, have today issued a joint warning about the need for reform of decarbonisation policies, and particularly the EU Emissions Trading System (ETS).

In a joint paper published today, the organisations say that the EU ETS is already reducing UK steel’s competitiveness and stifling its ability to invest in innovation.

Carbon leakage measures – which are meant to stop the EU ETS affecting the international competitiveness of vulnerable industries like steel – are not delivering the level of support promised and will become increasingly inadequate over time.

If they remain unchanged, the EU ETS will add nearly £30 a tonne to average steel production costs by 2030[1]. This could be disastrous to an industry in which contracts can be won or lost on as little as £5 per tonne of steel and, at today’s production levels, would cost the UK sector as a whole more than £300 million a year[2].

The European Commission’s reform proposals for the scheme, due to be published this week[3], will be crucial for the sector’s future. UK Steel and Community are recommending a series of reforms that would help UK steel plants operate on a more level playing field against competitors not facing these kinds of compliance costs.

Gareth Stace, Director of UK Steel, says: “The steel sector employs around 30,000 people, many in areas of relatively high unemployment, and contributes more than £45bn to the UK economy. And yet it is a sector under extreme stress. Surplus production capacity in the global market, unfair trade practices, a strong pound, high energy costs and regulatory pressures such as the EU Emissions Trading System are all making it hard for UK plants to compete.

“The steel sector wants to play its part in meeting the UK’s carbon targets and is actively researching lower carbon production methods. But it needs support and the current regulatory regime – and particularly the EU ETS – is hindering rather than helping by reducing our overall competitiveness and removing money each year that could be invested in innovation.”

Roy Rickhuss, General Secretary of Community, says: “This is about ensuring the UK Steel Industry is helped to decarbonise in a way that ensures its future and the many thousands of valuable jobs it provides, rather than being pushed overseas.

“In its current guise, the EU Emissions Trading System is having some serious unintended consequences. It is unwittingly contributing to the headwinds holding back the UK steel sector and we urgently want the European Commission to understand this and to work with us to find a better way forward.”

UK Steel and Community’s Principles for reform:

1.

Carbon leakage:

 

  • Removal of the cap on free allocation to industry
  • A carbon leakage list focused on sectors genuinely at risk
  • Better benchmarks
  • Free allocation that matches actual production levels
  • Access to additional allowances as needed.

2.

Funding for innovation:

 

  • An ETS innovation fund that really works for industry
  • Access to the EU’s Research Fund for Coal and Steel.

3.

Small emitters to be removed from ETS entirely and opt-out extended to sites with annual emissions below 50,000 tonnes CO2e a year.


UK Steel and Community’s full paper - Making reform of the EU Emissions Trading System work for Steel – can be downloaded here.


Notes to editors:

1.        EU trade association Eurofer

2.        Calculated by UK Steel based on Eurofer’s projected £30 a tonne multiplied by 2014 UK crude steel production of 12.1 million tonnes.

3.        Expected 11am Wednesday 15th July, 2015.

 

About UK Steel:

UK Steel is the trade association for the UK steel industry.  All the country’s steelmakers are in membership, together with a number of downstream steel processing sectors.

For further information contact Gareth Stace at UK Steel on 020 7654 1519 or gstace@eef.org.uk

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