As Maritime Carbon Solutions, we are keenly observing the implications of including shipping in the EU-ETS and its cascading effects on green steel production – a key component in our journey towards sustainable maritime practices.
The reduction in EUAs supply, coupled with an increase in the linear reduction factor, is setting a new economic landscape where the cost of ETS compliance is steadily rising. This shift directly impacts European steel producers, pushing the industry towards more sustainable methods like green steel production. In the heart of these revisions are the updated benchmark values for free allowances applicable to other non-shipping industries, effective from 2026 to 2030.
The EU's strategy extends beyond the ETS, with the impending implementation of the Carbon Border Adjustment Mechanism (CBAM). This mechanism aims to level the playing field for European companies by making the import of cheaper, non-green steel more expensive. Regulation (EU) 2023/956, passed by the European Parliament and the Council on May 10, 2023, lays the foundation for this mechanism. The CBAM commenced with a transitional phase starting on October 1, 2023, which is set to run until the end of 2025. As a component of the European Green Deal, the CBAM is designed as a carbon tariff applied to carbon-intensive products such as cement and some electricity imported into the EU. It is legislated to fully take effect in 2026, although reporting started in 2023.
The shift to green steel is a key component of global efforts towards decarbonisation, impacting industries from shipping to manufacturing. While it presents challenges, particularly in terms of cost and technological adaptation, its long-term benefits for sustainability and compliance with environmental standards make it a critical development in the fight against climate change.