EU's new decision could hit northern Sweden's green steel hard

The European Union is altering the rules of its primary climate tool, the emissions trading system, a move that could significantly impact the burgeoning green steel industry in northern Sweden. The European Commission's proposal aims to ease the pressure on carbon-intensive industries by slowing the planned increase in the cost of emitting carbon dioxide.

This shift in policy could jeopardize the business plans of major projects, including those by Stegra and SSAB in Boden and Luleå, which rely on the increasing cost of fossil fuel production to make their more expensive hydrogen-based steel competitive. The original calculations for these 125 billion kronor green steel initiatives are now under threat.

Swedish Prime Minister Ulf Kristersson expressed strong criticism of the EU's proposal. He stated that the changes are "unfair to Swedish companies that have been at the forefront and made necessary investments in the transition." Kristersson highlighted that the emissions trading system is a powerful tool for reducing emissions and a competitive advantage for Sweden and its jobs.

The EU Commission's compromise proposal reduces the annual decrease in emission allowances from 4.4 percent to 3.7 percent from 2031 and 1.7 percent from 2036. Additionally, the phase-out of free emission allowances for the steel industry is postponed from 2034 to 2038, granting fossil fuel producers four extra years of lower costs. This decision was influenced by ten major EU economies, including Poland, Italy, the Czech Republic, and Austria, who argued that current regulations harm their industries amidst geopolitical uncertainty and high energy prices.