Europe's steelmakers challenge EU's green strategy

BRUSSELS Thu May 19, 2011 11:03am EDT

BRUSSELS (Reuters) - Europe's steelmakers launched their most vocal challenge yet to the region's green growth strategy on Thursday, saying the added cost of curbing emissions would hand the advantage to overseas rivals.

Many steel companies are currently profiting from the European Union's efforts to curb emissions, especially its carbon market, which has given steel companies an excess of free pollution permits, which they have sold on at a profit.

Ten of Europe's biggest plants were given excess carbon permits worth almost 1 billion euros ($1.4 billion) last year.

ArcelorMittal earned $140 million from the sale of spare permits.

But that is set to change after an overhaul of the Emissions Trading Scheme (ETS) in 2013, when only the most efficient plants will get permits for free and less efficient plants will have to start paying like many other big polluters.

"We, the leaders of the European steel industry, wish to express our grave concern over EU climate change policy," industry body Eurofer said in a letter to European heads of state and the European Parliament.

"Legislators appear to believe that the proposed unilateral legislative measures will help mitigate climate change -- they are wrong," the letter added.

Eurofer argues that added environmental costs will put steelmakers at a competitive disadvantage to overseas rivals, forcing steel production to migrate outside the EU where manufacturers can pollute for free. The net result would be lost European jobs and no climate benefit, they say.

Eurofer is planning to challenge part of the carbon market 2013 overhaul at the EU's General Court.

It says the move will cost steelmakers roughly 18 billion euros in 2013-2020, although some analysts say there will be no added costs at all.

DEEPER CURBS?

Wolfgang Eder, president of Eurofer and chairman of Voestalpine, took the challenge further by questioning the European Commission's strategy of moving toward a greener economy.

That strategy is based on hopes that new high-tech "green jobs" will offset any loss in jobs in traditional heavy industry, but Eder called the assumption "deplorable."

He said the steel industry should be protected as it was vital to Europe's overall economy, as well as its green ambitions, because it provided materials for making wind turbines and fuel-efficient cars.

Others turned that argument on its head by highlighting that steelmakers would gain from new green business opportunities that were themselves created by the climate strategy.

"Estimates from the wind industry suggest that we will need 8,000 wind turbines by 2020 -- which means over 10 million tonnes of steel," European Commission official Fabrizio Barbaso told steelmakers.

Industry Commissioner Antonio Tajani told the conference that high-tech steels would see increasing growth as the EU overhauls its building stock to reduce energy consumption and develops new fuel-efficient cars.

Some European countries, such as Britain, have opted to deepen emissions cuts -- a move that worries steelmakers even more.

But Tajani told them he would not support such a move across Europe, unless it was mirrored across the industrialized world.

"Any move to take on more ambitious objectives than that of 20-percent CO2 reduction must be on the condition that our main international partners make similar commitments," he said.

(Reporting by Pete Harrison, editing by Rex Merrifield and Jason Neely)