The carbon dioxide (CO2)-intensive industry in Asturias will have a more lenient calendar than the one initially proposed by the European Commission to comply with the emission reduction requirements and to adapt to the suppression of free carbon credits.
The European Council and Parliament reached an agreement in the early hours of this Sunday (which is provisional at the moment, waiting for it to be endorsed by the legislative chamber and by the ministers of the 27 member states present in the Council) by which Although the adjustment will begin in 2026 –the same year that the European Commission and the European Council initially proposed–, it will do so more slowly in the first years, with reductions of 2.5% in 2026, 5% in 2027, 10% in 1028 and 22.5% in 2029.
Free rights. The pact places the definitive suppression of free carbon credits for the large emitting industry in 2034, which means a period two years more comfortable than the one that came out of parliament and, although it anticipates its end in one year compared to what was initially advocated the Commission and the Council, the gradualness with which the progressive reduction of carbon credits at no cost for emitting factories is now proposed makes it more affordable for the industry to adapt and replace carbon-intensive technologies with other clean and no greenhouse effect.
The European Commission, the executive body of the Union, intended in its initial approach that the reduction be much more intense and accelerated: 10% in 2026, 20% in 2027, 30% in 2028 and 40% in 2029. Now it will be done in a “slower at the beginning and faster at the end of the period” mode.
In the case of the Asturian steel industry, the completion in 2034 gives the company a margin, given that the useful life of the blast furnace A – now stopped and which is expected to be replaced, like the Gijón steelworks, by an electric arc furnace hybrid and an iron ore direct reduction furnace – expires in 2024 and since blast furnace B will be depleted in 2032. Thus, and although they will face decreasing availability of carbon credits, neither of these facilities will see totally deprived of free emission rights for the duration of its useful life.
The same would not happen in the event that the proposal that started months ago from the Environment Commission of the European Parliament (the toughest of all those proposed) had prospered, and that was already rejected by the plenary session of the chamber in June. This alternative would have meant, had it been successful, that the adjustment would begin a year earlier (in 2025) and conclude in 2030, four years first of what has now been agreed and two before blast furnace B (the most modern and efficient of the two) would have completed its life cycle.
CO2 reduction. The provisional agreement this Sunday between the two co-legislative institutions of the European Union will entail –if it is elevated to final, as is likely to happen– the elimination by 2030 of the emissions market of 62% of the CO2 tonnage with respect to the volume emitted by the European industry in 2005. Since then (seventeen years ago), emissions have already contracted 41%, according to the European Council, and the decision intends to continue forcing, with a “more ambitious” approach, the transition towards neutral production methods in carbon to prevent climate change.
The pact proposes increasing the reduction rate by 4.3% per year between 2024 and 2027 and by another 4.4% between 2028 and 2030.
Climate tariff. The tightening of environmental policy will be offset by the entry into force of the climate tariff. This border adjustment (a tax on imports of steel, cement, aluminum, fertilizers, electricity and hydrogen from non-EU countries with more lax legislation and which do not assume penalties for emitting CO2) was agreed on the 13th for its parallel application with the reduction of emission rights. Although its entry into force will take place on October 1, it will be for informational purposes and will not be fully effective until 2026, when the gradual suppression of carbon credits begins.
The European Council specified that the border carbon adjustment “will be applied only to the proportion of emissions that do not benefit from free emission rights.”
Exports. For the protection of European exports to non-EU countries with advantageous environmental legislation for their national production, an estimate of 47.5 million euros will be endowed, which the states will obtain from the auction of emission rights. Its investment is intended to neutralize any risk of productive relocation: the so-called “carbon leakage”. Before 2025, the European Commission must assess the risk of this circumstance linked to exports occurring and present a legislative proposal, if necessary, to avoid it.
Innovation Fund. The two co-legislators decided in turn to increase the so-called Innovation Fund with an additional 125 million. This instrument, which will be endowed with 575 million and will last until 2030, will support the investment of the European industry in green technologies. ArcelorMittal has already presented several projects, as recalled by the Asturian MEP Jonás Fernández.
Transportation and homes. The maritime transport sector will become subject to carbon credit trading, which will affect 40% of its emissions in 2024, 70% in 2025 and 100% in 2026.
A new rights trading regime is also created, separate from the general one, for road transport and for the residential sector and distributors that supply fuel to buildings due to CO2 emissions from heating. The system will start operating in 2027, although it will be delayed to 2028 if energy prices are exceptionally high and additional rights will be released if its price exceeds 45 euros.
Social Fund for the Climate. To help vulnerable households, SMEs and transport users to cope with the introduction of a regime of rights in these sectors, a Social Fund for the Climate is created with 65,000 million.
The Asturian MEPs, Jonás Fernández and Susana Solís, and FADE celebrate the decision
The agreement reached by the European Council and Parliament was celebrated as good news for Asturias by the two Asturian MEPs (Jonás Fernández and Susana Solís) and by the Asturian employers’ association (FADE). Jonás Fernández (PSOE) pointed out that the approved calendar is “favorable for the Asturian industry because it delays until 2034 the end of the free emission rights and slows down their elimination, slowing down the rate of reduction compared to the initial proposal of the European Commission, which raised 10% per year. “The new legislation”, he pointed out, “guarantees that our industry can undertake the necessary ecological transition with guarantees and without putting jobs at risk.” “The Parliamentary Committee on the Environment put forward a really unacceptable proposal and we have worked hard to correct it,” he added.
Susana Solís (Citizens) stated: “What Asturias had been demanding for years for the competitiveness of its industry is now a reality with this agreement.” “We have a good agreement for the Asturian industry. There were two key points, and in both of them the claims of our sector have been taken into account”, referring to the calendar for the implementation of the border adjustment mechanism and the progressive disappearance of rights of emission (“Although the start is close in time, its implementation is progressive enough so that the industry has time to adapt its production,” he said) and the mechanism “to protect our exports,” he explained.
María Calvo, president of FADE, “celebrated” the agreement. In her opinion, “the new calendar is less damaging to our industry than was initially proposed.” Fade supports decarbonization but “not at the cost of competitiveness.” For this reason, she claims that “the border adjustment mechanism enters into force as soon as possible in order to be able to monitor its operation and find out its real impact prior to the start of the reduction of the free emission rights”. She also called for European funds to be accelerated.