1. The CBAM & ETS Transition (The “Push” Factor)
January 1, 2026, marks the start of the CBAM definitive regime. This is no longer just a reporting phase; it is a financial instrument designed to equalize the carbon costs between domestic and imported steel.
Phasing Out Subsidies: Concurrently, the EU has begun the gradual reduction of free carbon allowances under the Emissions Trading System (ETS). This effectively removes the “hidden fossil subsidy” for traditional blast furnace production, making carbon-intensive steel more expensive to produce within the EU.
Import Levies: For importers, 2026 requires the collection of verified emissions data. While the actual purchase and surrender of CBAM certificates (linked to weekly ETS auction prices) begins in earnest in 2027 for 2026 imports, the “shadow cost” is already being factored into current contracts.
Result: This dual pressure closes the price gap between conventional steel and green alternatives, making the €100–170/tonne premiums mentioned in the report more economically justifiable for buyers.
2. The EU Automotive Package (The “Pull” Factor)
The newly proposed Automotive Package (published late 2025) has fundamentally changed how car manufacturers view green steel.
Fleet Emission Offsets: While the EU aims for a 90% reduction in tailpipe emissions by 2035, the remaining 10% can be offset through the use of “low-carbon steel made in Europe” (up to 7%) and e-fuels (up to 3%).
Regulatory Asset: For automakers, green steel is no longer just a “green marketing” cost; it is a compliance tool. By using green steel, manufacturers can continue to sell a limited number of hybrid or internal combustion engine (ICE) vehicles while still meeting fleet-wide $CO_2$ targets.
Demand Cap: Current estimates suggest this specific regulatory offset could generate a dedicated demand for roughly 1 million tonnes per year of green steel in the EU.
