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Decarbonising Steel: Options for reforming the EU’s Emissions Trading System

Steelmaking is one of the most carbon-intensive industries in the European Union. The sector emits 221 megatonnes of carbon dioxide each year. To ensure the EU achieves climate neutrality well before 2050, it is necessary to drastically reduce emissions in the steel sector.

The EU’s Emissions Trading System is the key instrument for incentivising emissions reduction in energy-intensive sectors, such as steel, but it is currently underperforming.

The ongoing revision of the system is an invaluable opportunity to strengthen the EU ETS and correct the flaws that have resulted in flatlining emissions and huge windfall profits in the steel sector over the past 10 years.

This will require updating the current benchmarks to ensure they encourage the uptake of cleaner technologies and the circular use of materials and implementing the proposed Carbon Border Adjustment Mechanism in such a way that triggers more investments in emissions reductions. It will also require raising and recycling more revenues to fund innovation to support industry in the green transition.

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