EU Climate Policy Threatens Future Of European Steel Industry

To reduce CO2 emissions, the EU plans to cut emissions rights for the steel industry. According to the industry, this policy threatens its very existence.

The planned reform of CO2 emissions trading in Europe threatens hundreds of thousands of jobs in Germany. This is the conclusion of a study by the research institute Prognos and commissioned by the German Steel Association. “The industrial business model of the German economy is at stake,” warned association president Hans Jürgen Kerkhoff.

A significantly tougher Emissions Trading Scheme, as envisaged by Brussels from 2021 onwards, could in a few years lead to a rapidly progressing de-industrialisation in important parts of the value chain since nothing like it exists anywhere else in the world. “The consequences for the German economy would be grave,” Kerkhoff said.

According to the Prognos study, production and employment in the German steel industry would collapse by two thirds by 2030. “Add to that employment losses in upstream and downstream industries,” the study says. And that’s not all: “The consequences go far beyond the industrial value chain,” study author Jan Limbers from Prognos. The researcher sees a total of 380,000 jobs at significant risk, mostly in the services sector, e.g. in retail and in the hospitality industry or in logistics and finance. “Businesses and households will have less income for consumption and investment,” said Limbers who also sees a decline in gross domestic product of 30 billion euros.

252,000 jobs are lost in the service sector alone, according to the study, around 71,000 in industry, 37,000 in the steel sector and 17,000 in the construction industry. And that are rather conservative assumptions, Limbers says. Because self-reinforcing effects, such as similar effects in other energy-intensive industries such as chemicals or cement or effects in other EU countries, were not included in the calculations.

The reason for the alarm is the planned re-organisation of the EU’s emissions trading scheme (ETS). The reform proposed by the European Commission for the so-called fourth trading period starting in 2021 envisages an increase in the standard values ​​for CO2 emissions and, at the same time, a reduction of the number of available industrial emissions rights. In addition, the Commission wants to grant fewer exemptions for energy-intensive industries such as steel and chemicals. The responses are correspondingly fierce.

“If the proposal is implemented, it would be an existential threat to us,” said Heinz Jörg Fuhrmann, Chairman of the Lower Saxony steel group Salzgitter. German industry leader ThyssenKrupp is threatening consequences if the EU proposal is not altered. “European Steel would no longer be competitive,” said the CEO of Dax Group, Heinrich Hiesinger. ThyssenKrupp faces additional costs of more than 2 billion euros in the period from 2021 to 2030. “These are costs that we simply cannot carry. Neither further savings nor restructuring would help anymore. For ThyssenKrupp, steel production would no longer be possible,” Hiesinger said.

However, a final decision hasn’t be taken yet. Both policymakers as well as the European Parliament will have to deal with the Commission’s proposals by the end of this year. What is more, the pressure is rising from other EU member countries with their own steel production. “Do not screw up,” Saarland’s economy minister, Anke Rehlinger (SPD) warns while speaking of “partially dubious specifications” from Brussels. That’s why she is fighting with other state ministries for changes to the EU’s emissions trading plans. The trade unions too are mobilizing. IG Metall has announced a rally in Duisburg for 11 April – with German Economics Minister Sigmar Gabriel as the main speaker.

But the plans are having an impact already. “Investment prospects are affected”, said Steel President Kerkhoff. “Consequently, companies are holding back.” World leader ArcelorMittal is placing conditions on its planned investments in Germany. Around 110 million were planned to be invested in four locations in Bremen, Hamburg, Duisburg and Eisenhüttenstadt. “Given the political risks, we will only decide on a case by case whether we will actually implement the planned investments,” said ArcelorMittal’s Germany boss Frank Schulz.

Translation GWPF

Full story (in German)