European industry groups are pushing for reform of the EU Emissions Trading System as rising carbon costs hit energy-intensive sectors like steel. A carbon price of 150 euros per tonne could raise steel production costs by 50 percent by the early 2030s, according to industry estimates. Groups warn that without changes, the ETS could trigger a 30 to 40 percent decline in EU manufacturing activity and risk up to 5 million jobs. The core problem is that decarbonisation tools are not yet ready at scale. Steelmakers lack access to competitive electricity, affordable green hydrogen, carbon contracts for difference, and adequate carbon capture and storage. Industry argues that the current ETS design punishes domestic production without offering a realistic path to cleaner operations. The EU maintains its 2040 emissions target, but the gap between ambition and on-the-ground capability is widening. The debate is a key test for carbon market design. If the ETS is not adjusted, the EU risks pushing heavy industry offshore to regions with weaker climate rules, undermining both emissions goals and the industrial base. The outcome will shape how carbon pricing interacts with industrial policy for the rest of this decade.
