A large part of heavy industry carbon emissions is exempted from ETS obligations. The allocation system of free emissions allowances was designed to shield European heavy industries from the purported risk of “carbon leakage”, the alleged risk that industries will relocate their production outside of the EU to countries or regions with more lenient carbon emission policies.
The Free Allocation Regulation (FAR) revision is a necessary step to ensure the last years of the free allocation system are coherent with the aim of a full phase-out by 2030 (or 2034 for CBAM sectors) and provide the investment signals necessary to funnel funding into industrial decarbonisation.
Steelmaking represents the most polluting industrial sector in the EU. Delaying the transition to net-zero steelmaking in anticipation of a fully effective carbon pricing mechanism will prove too late.