€8 in free permits for every €1 reinvested

The latest analysis from SteelWatch reveals a stark reality: Europe’s three largest steelmakers received €25.7 billion in free ETS allowances between 2021 and 2025, yet committed only €3.2 billion in net decarbonization investment. That’s roughly €8 in free pollution permits for every €1 actually reinvested in cleaner production.

ArcelorMittal directed less than 5% of its windfall toward decarbonization, while thyssenkrupp and voestalpine received free allocation worth seven and two times their respective net investments. If nearly a decade of generous free allocation has produced such limited results, the case for extending or increasing it collapses under its own evidence.

Free allocation means steelmakers are handed EU carbon allowances without paying for them, significantly lowering, and in many cases nearly eliminating, the direct cost of their emissions under the ETS. While originally intended as short-term protection against carbon leakage, this approach has created a fundamental incentive problem.

A mechanism like Carbon3 can be part of the solution, particularly as a way to mobilize private capital and create market demand for green steel. It aligns well with the direction of CBAM and Scope 3 reporting requirements. However, it is not a substitute for fixing the EU ETS itself.

Report source: steelwatch.org