European Steel Industry on the Brink: Can a Carbon Tax Save It?
Luxembourg – Seven years ago, Lakshmi Mittal, executive chairman of ArcelorMittal, the world’s largest steel producer, boldly called for a carbon border tax to level the playing field for European steelmakers grappling with decarbonization costs. While the EU has since adopted a carbon border adjustment mechanism (CBAM), Mittal sounds a dire warning that the current design is insufficient to safeguard European steel.
Mittal paints a stark picture: the European steel industry is struggling under the weight of decarbonization costs and an influx of cheap, high-emission steel from countries like China, leading to production declines and mounting job losses.
"The European steel industry has never been so challenged," Mittal stated. "Caught as it is between the pincers of decarbonization costs and the fallout from severe overcapacity…Steel production in Europe has fallen by nearly a third since the financial crisis, with jobs down by a quarter."
The situation is further exacerbated by dwindling demand and high energy costs. This perfect storm has left profit margins at levels not seen since the pandemic, forcing companies like ArcelorMittal to delay critical investments in low-carbon technologies like green hydrogen.
The irony, Mittal points out, is that while Europe leads the charge toward a greener future, its noble ambitions could backfire.
"You might argue this is free trade in action. I would say the trade might be free, but it isn’t fair," Mittal asserts. "Enabling fair trade takes on a new dimension when Europe is the only major market with a cost on carbon."
With steel production shifting to regions without stringent environmental regulations, the global carbon footprint may actually increase, rendering Europe’s efforts futile.
Mittal believes there’s still time to avert disaster, urging decisive action from the EU.
"If there is genuine commitment to maintain a domestic industry, the combined policy landscape must be tackled together to form a supportive environment that enables European steelmaking to decarbonize and thrive," Mittal emphasizes.
He outlines two critical steps:
1. Curb Surging Imports: Mittal advocates for emergency trade measures to protect European steel, akin to policies implemented in the US and Brazil, where the industry is sought-afterpreserved.
2. Strengthen the CBAM: While acknowledging the EU’s initiative, Mittal urges the strengthening of the CBAM to prevent circumvention by countries dumping cheaply-produced, high-emission steel within Europe while exporting cleaner product domestically and to non-EU markets.
"The decisions taken in the next 12 months will determine the future size and shape of the European steel industry," Mittal warns.
Mittal’s call to action resonates with a sense of urgency. It’s a stark reminder that the race to decarbonize must unfold in a globally fair and equitable manner, lest Europe sacrifice its industrial strength while failing to achieve its environmental goals.
The world will be watching to see if Europe rises to the challenge, preserving its industrial heritage and leading the charge toward a truly sustainable future.
