A study published at the beginning of the year on the EU's proposed 2021 Carbon Border Adjustment Mechanism (CBAM) shows that while it would protect steelmakers from foreign competition with higher CO2 emissions at a lower CO2 price, it would bankrupt steel processors due to rising starting material costs and greatly increase the risk of migration. The study was commissioned by the German Steel and Metal Processing Association (WSM). It is urgently calling on the EU Commission to make improvements and include the entire value chain.
"The EU proposal of July 14, 2021, falls short," criticizes WSM CEO Christian Vietmeyer. "Only with a holistic view of all actors in the supply chain can carbon leakage be prevented." The IW calculates that the costs of steel processors in Germany would increase by two billion euros and about 3.5 percent of the industry's value added "if the CO2 price on steel were to take full effect thanks to border adjustment and the associated discontinuation of the free allocation of emission certificates." This fatal development would swallow the entire, roughly two-percent return on sales of steel processors, especially since the mostly medium-sized companies would not be able to pass on the costs. They would no longer be competitive.