6 July 2026 – Brazil has sharply criticized the EU steel tariff measure and also pointed out that the Commission did not negotiate “deals” everywhere. Are countermeasures now looming? EU ETS: the silent trillion – how Europe’s steel industry avoids CO2 costs at everyone else’s expense.
- Free Trade Announced – and Then Comes the Tariff Hammer
- EU ETS: The Silent Trillion – How Europe's Steel Industry Avoids CO2 Costs at Everyone Else's Expense
- 700 Million Tonnes – and Nobody Talks About It
- The Fundamental Problem: Overallocation as a Systemic Flaw
- CBAM Does Not Solve the Problem – It Overlays It
- What This Means Politically
Free Trade Announced – and Then Comes the Tariff Hammer
Brazil has sharply criticized the new EU steel measures: quotas were reduced by 47%, and the out-of-quota duty was doubled to 50% – without any agreement having been reached under GATT Article XXVIII. This hits, of all countries, one with which the EU has only just concluded the Mercosur free trade agreement.
That’s Not What Free Trade Looks Like
Brazil gets straight to the point: restrictions against countries that are not responsible for supposedly existing global overcapacity do not solve the problem. They provoke countermeasures. Anyone who offers trading partners free trade with one hand while tightening the tariff screw with the other should not be surprised by escalating retaliation. Brussels is systematically sawing off the branches on which its own trade diplomacy sits, while still selling this as a success.
EU ETS: The Silent Trillion – How Europe’s Steel Industry Avoids CO2 Costs at Everyone Else’s Expense
While importers are increasingly being asked to pay under CBAM, the domestic steel industry is sitting on a certificate cushion worth billions – and this remains largely unmentioned in the political debate.
700 Million Tonnes – and Nobody Talks About It
A recent analysis by Fastmarkets shows that over the lifetime of the EU ETS, the European steel sector has accumulated a surplus of almost 700 million tonnes of CO2 equivalents in free certificates. At a current CO2 price of around EUR 80, this corresponds to a market value of around EUR 56 billion – bankable certificates with unlimited validity that can be held, sold, or used to cover future emissions.
Based on the sector’s 2025 emissions, this stock could fully cushion the industry’s CO2 costs for more than seven years. A question from a Member of the European Parliament to the Commission addresses precisely this point and asks how the Commission assesses this structural distortion in the context of CBAM.
The Fundamental Problem: Overallocation as a Systemic Flaw
As early as 2020, the European Court of Auditors found that free certificates were allocated with only limited targeting. Between 2013 and 2019, more than 5 billion free certificates were issued to industry. Overallocations arose from historical emissions baselines, recession effects, and benchmarks that did not sufficiently reflect actual declines in production.
Particularly problematic: the system structurally favors the conventional blast furnace route over lower-emission electric arc furnace processes. Those who invested early effectively receive fewer free certificates than those who persist with proven, more CO2-intensive methods.
CBAM Does Not Solve the Problem – It Overlays It
Politically, CBAM is being sold as a replacement for free allocation. The reality is more complicated. The CBAM factor rises from 2.5% in 2026 to 86% in 2033, meaning that free allocation and CBAM will continue to run in parallel until 2034. During this transition phase, importers will gradually be burdened with CBAM payment obligations, while EU producers will continue to receive residual allocations and can draw on historical certificate stocks.
That is not a level playing field. It is a structural asymmetry in favor of established large producers – at the expense of importers, downstream SMEs, and ultimately consumers.
What This Means Politically
The same industry that today loudly demands ETS stability and tougher CBAM rules is sitting on a certificate cushion that can absorb a significant share of its CO2 costs for years. At the same time, importers and downstream processors are expected to bear the full CBAM burden – without comparable buffers.
As long as this imbalance is not explicitly taken into account in the CBAM calculation, CBAM is not an instrument for creating equal competitive conditions. It is a mechanism that cements the existing advantages of large producers and distributes the transformation costs across everyone else.
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