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The writer is executive chairman, ArcelorMittal
Seven years ago, I advocated for the introduction of a carbon border tax — to ensure a level playing field between European industrial producers bearing decarbonisation costs, and cheaper imports that did not. You might assume I am therefore satisfied that a carbon border adjustment mechanism was subsequently adopted by the EU, and is now in its testing phase, with full implementation starting in January 2026.
Unfortunately, I am here not to raise the cry of victory, but to sound a voice of alarm. As it stands, the CBAM is inadequately designed and, unless significantly strengthened, a critical mechanism to enable Europe to achieve its stated goal of “decarbonising and industrialising at the same time” will fail.
The sober truth is that the European steel industry has never been so challenged, caught as it is between the pincers of decarbonisation costs and the fallout from severe overcapacity, especially in China, which has resulted in increased imports. Steel production in Europe has fallen by nearly a third since the financial crisis, with jobs down by a quarter. Demand has not recovered to pre-Covid-19 levels, which combined with high energy costs and elevated imports has led to margins at a level last seen during the pandemic.
The negative impact on profitability comes at a time when the industry is expected to make final decisions on decarbonisation projects that will cost billions of euros, investing in technologies — think green hydrogen — which are not economically viable today.
You might argue this is free trade in action. I would say the trade might be free, but it isn’t fair. Enabling fair trade takes on a new dimension when Europe is the only major market with a cost on carbon. When Europe decided to take the lead on implementing climate policy — a noble ambition — it was assumed that everyone else would follow. That has not happened, and Europe’s competitiveness in globally-traded manufacturing sectors like steel is declining.
The current dynamic is bad for both Europe and the planet. A shrinking industry is incompatible with the continent’s strategic priorities, captured in the “clean industrial deal” outlined in July. It will reduce European emissions, but not in a way that helps the planet as primary steelmaking relocates to places where decarbonisation matters less. That is not solving the problem.
It need not be this way — I am convinced Europe can retain a competitive and innovative steel industry. But it must make a choice. Does it want to produce iron and steel in the continent? Or does it prefer to import it, potentially with a higher carbon footprint? This fundamental question must be answered now.
If there is genuine commitment to maintain a domestic industry, the combined policy landscape must be tackled together to form a supportive environment that enables European steelmaking to decarbonise and thrive. The lack of this led to our announcement last week explaining why we are not able to take final investment decisions on projects to replace blast furnaces with lower-carbon technology at this point in time.
The first challenge is to urgently address imports. Intervention is required so that European steel is better protected, as in the US and Brazil where the industry is considered strategic. Emergency trade measures would be a strong first signal to address this.
Second, ensure that the CBAM truly achieves its purpose. Here, Mario Draghi’s report on European competitiveness is relevant. He noted that CBAM’s success “is still uncertain” and outlined several risks which the EU must manage if it is to succeed. In particular, CBAM must not allow steel imports from countries that circumvent climate protection by selling into Europe from a few “clean” installations while selling their higher emissions steel into domestic and non-EU markets.
I don’t pretend this is straightforward, but the challenge is political as much as mechanical. With new leadership in Brussels, and both the clean industrial deal and the steel and metals action plan under development, the time to act is now. The decisions taken in the next 12 months will determine the future size and shape of the European steel industry. Failure to act will only result in the continued decline of iron and steelmaking in the continent.
My message is clear. Europe should not walk away from its industrial heritage, handing over future industrial growth to other regions. There is considerable investment into the green transition waiting to be quickly activated, once the requisite policy clarity is achieved. If the right decisions are taken, Europe can be at the vanguard of the technology over the next 50 years. Don’t let that opportunity pass.
