The EU has set a goal of a 55% reduction in carbon emissions by 2030 (compared to 1990) and net zero carbon emissions by 2050. A key part of achieving these goals is the European Union Emissions Trading System launched in 2005.
It operates on a ‘cap and trade’
system, where maximum emissions are set and allowances over the maximum are
allocated and auctioned and can be traded with other companies. Emissions
reductions of 61% from 2005 levels for businesses have been proposed in the Fit
for 55 package.
As of 25th February 2022, the EU
price for carbon emissions was EUR88.14/t (US$103.7/t). The EU is also
providing positive investment in carbon emissions reduction technologies
through its EUR1.1bn (US$1.3bn) Innovation Fund, through which Swedish
steelmaker SSAB has already received funding. European steel mills, therefore,
have the greatest economic incentive for decarbonisation in the world.
In addition to European
regulations and funding, the US and the EU ended their steel trade dispute in
October 2021. They have agreed to collaborate on green steel together and have
set a date in two years’ time for negotiations on a trade agreement that will
favour low-carbon, or green, steel. The EU and the US could agree on a scheme
that resembles the EU’s carbon border adjustment scheme, which will penalise
steel producers with larger carbon emissions and protect the expensive
decarbonisation efforts of European steelmakers.