Germany Vows Help for Battered Steelmakers Ahead of Carbon Bill

  • Germany seeks exemptions for steel industry in ETS reform
  • German steelers face EU1 billion bill p.a. for CO2 permits

Germany’s ruling coalition is backing calls from steel producers like Thyssenkrupp AG and Salzgitter AG to shield them from financial risks from the European Union’s revamp of the emissions trading system.

With signs emerging that the steel industry faces steeper carbon reduction bills from 2020, lawmakers in Berlin this week urged the government to dampen proposed changes to the emissions trading system that could bump up steel mill costs. Europe’s steel industry has been hurt by global overcapacity caused mainly by China and Russia exports and would suffer even more if carbon permits prices rise sharply, they said.

“Pour a glass of water on a man who has it up to his neck and you’ll risk drowning him,” said Social Democratic Economy and Energy Minister Sigmar Gabriel said in a speech on Thursday, referring to the risks that new costs might impose. “While steel dumping prices are the main problem, there’s a problem too with emissions trading.”

Germany is locking horns with the EU Commission on ETS reform and steel industry protections. The moves threaten undercut reforms targeting the very exemptions that have helped weaken ETS. Gabriel said he backed a steel lobby proposal to garner free permits for the top 10 percent of European steel mills that are the most efficient in reducing CO2 emissions.

Germany’s also battling with the commission to preserve the steel industry’s exemption from compulsory payments for electricity under the renewable energy program, said Gabriel. Mills that use gas byproducts to generate their own power are currently exempt from paying the surcharge. The exemption expires this year and is being scrutinized by the commission.

The European Parliament may seek faster carbon reductions in the EU-28 over the next decade, lawmakers from the chamber said this week. That comes on top of a call from French President Francois Hollande’s for a carbon-price-floor. Germany is skeptical of moves to augment the centerpiece of ETS reform that focuses on withholding permits in a reserve to bump up market prices.

Germany’s steel lobby says it has no alternative to fighting the commission’s ETS proposals. Steel producers face cumulative extra costs of about 1 billion euros ($1.1 billion) per year from 2020 if exposed in full to the reforms proposed by the commission. Salzgitter said ETS reform proposals may add 100 million euros to its costs annually.

“The industry can’t cope with that,” said Beate Brueninghaus, the Dusseldorf-based group’s spokeswoman, by phone. Some 87,000 jobs are directly linked to steel in Germany and over 300,000 in Europe as a whole, she said.

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