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9 June 2022 – The vote on the new regulation of ETS allowance trading in the European Union failed yesterday in the EU Parliament. As a result, votes on the Carbon Border Tax CBAM and the Social Climate Fund were postponed. And China is again massively limiting crude steel production. Among others, in the Chinese provinces of Shandong, Hebei, Hunan and Guizhou.

EU vote on ETS trading scheme failed in parliament
EU vote on ETS trading scheme failed in parliament

EU vote on ETS trading scheme failed in parliament

The new European emissions trading scheme, which was to be voted on in the EU Parliament yesterday, has collapsed after the conservative European People’s Party (EPP) tried to water down the ETS draft even further. This led to heated discussions and arguments within the Parliament and ultimately to the rejection of the draft.

CBAM decision postponed

Due to this development, the votes on the Carbon Border Tax CBAM and the Social Climate Fund, which are closely linked to the new regulation of allowance trading, have been postponed upon request.

It is not yet clear when a new vote on these instruments, which are so important for the EU’s Fit for 55 goals, will take place.

Free ETS certificates to be phased out with CBAM introduction

In the end, the European Steel Manufacturers’ Association EUROFER tried to influence the vote with a massive media campaign. Even though the draft for the new ETS Trading Scheme was already watered down, EUROFER has not yet been able to achieve that the necessary phasing out of free ETS certificates within 10 years is removed from the CBAM regulation.

Free ETS certificates lead to unfair conditions

Among other things, the failed draft provided for the continuation of free ETS allowances for the export of EU steel products. However, the free allocation of allowances is viewed critically by many MEPs and would lead to an imbalance in the much-vaunted “level playing field” of the EC internationally. Moreover, the free ETS certificates together with CBAM violate WTO regulations.

China: Strict production restrictions support steel prices

The Chinese government’s measure to restrict crude steel production had already led to a shortage in availability in 2021. This year, steel production will now be limited in the Chinese province of Shandong, the third-largest steel-producing province in China. Other Chinese provinces have already joined the measures, including Hebei, Guizhou and Hunan.

Chinese steel production to fall below 2021 volumes

As a result, steel production in China will be lower in 2022 than in 2021, but to achieve this target, analysts say output will have to be slashed again in the second half of 2022. These strict measures to limit steel production should further support steel prices.

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