Three of Europe’s largest steel producers—ArcelorMittal Europe, Thyssenkrupp Steel, and Voestalpine, which together account for around 60% of Europe’s integrated steel production—are calling for what they describe as an “urgent and pragmatic reform” of the EU ETS.

The joint appeal from the steelmakers, issued this week, is the latest sign of growing concern among energy-intensive industries, which argue that the current carbon pricing framework risks undermining Europe’s competitiveness, discouraging investment, and accelerating industrial decline across the continent.

Industry leaders warn that, without reform of the ETS, Europe could lose up to 40% of its steel-intensive manufacturing base, putting as many as 5 million jobs at risk. They also estimate that the cost of producing steel in the EU could rise by around 50% by the early 2030s.

Marie Jaroni, CEO of thyssenkrupp Steel, urged policymakers to ease the cost burden created by the ETS, arguing that excessive carbon costs risk undermining companies investing heavily in decarbonisation. Highlighting the growing gap between policy ambitions and industrial realities, she stated bluntly: “The ETS needs a reality check”.

Environmental organisations, however, argue that heavy industry has historically benefited from substantial free allocations under the ETS. Carbon Market Watch notes that “The biggest emitters received the lion’s share of these freebies. ArcelorMittal, responsible for a third of EU steel emissions, received more than €3.8 billion in free allowances in 2023, and ThyssenKrupp and Voestalpine are not far behind with €1.8 billion and €795 million.”

The debate highlights the broader challenge facing EU policymakers ahead of the European Commission’s long-awaited ETS review on 15 July: how to preserve industrial competitiveness while maintaining the bloc’s decarbonisation ambitions.