EUROFER Initiates Legal Action against European Commission over Steel Benchmarks

The European Confederation of Iron and Steel Industries (EUROFER) has announced that it will challenge the European Commission’s decision on establishing benchmarks under the European Emissions Trading System (ETS), once adopted by the Commission in mid-April 2011.

In a press release issued by EUROFER, Gordon Moffat, director general, says, “From the very beginning of the Commission consultation process on benchmarking we have stressed that the proposal made by the Commission’s climate department for the steel benchmarks infringes the ETS directive. The directive requires that best performers in carbon leakage sectors receive for free all the allowances necessary to cover their emissions in order to prevent de-localization of emissions, production and jobs to countries outside Europe – that’s the rule, but since it is not being applied for the steel industry, resulting in billions of additional costs, we now have no other choice than to go to court.”

The directive requires the setting of benchmarks that determine the level of free allowances for industrial sectors, starting in 2013. The directive notes that the benchmark will be the average performance of the 10 percent most efficient installations in the sector.

EUROFER adds that the steel benchmarks for primary steelmaking set by the EC are not based on this rule. The EC did not assign the full carbon in unavoidable waste gases to the steel benchmarks, despite there being specific provisions in the directive for the use of recovered waste gases for electricity generation due to their substitution of primary fuels saving millions of metric tons of carbon dioxide emissions. The benchmarks are therefore technically unachievable and, as a consequence, also now create a disincentive in the recovery of unavoidable waste gases. In addition, EUROFER claims the commission did not, in setting the benchmarks, use data provided by the industry in accordance with the directive but rather relied on literature on best technologies which did not reflect the technical realities of the industry, further skewing the benchmarks and increasing the financial burden.

EUROFER estimates that the resulting additional costs for the EU steel industry will be about €5 billion over the period between 2013 to 2020 on top of the €6 billion already resulting from the best performer benchmarks and on top of the over €12 billion of costs for primary and secondary steelmaking due to ETS-related increases in electricity prices.

Any further tightening of the ETS by increasing the reduction targets or holding back of allowances from the system could easily double the additional costs as well as the total costs.

EUROFER says that as a consequence the European steel industry, through EUROFER, has instructed its lawyers to initiate a request for annulment of the EC decision on the steel benchmarks.