Strengthening Europe's Steel Future: A Bold Action Plan for Decarbonisation and Competitiveness
The European Commission has launched a comprehensive Action Plan on Steel and Metals to address both the competitiveness and sustainability of Europe’s steel and metals industries. This strategic plan is designed to secure the long-term future of these vital sectors by tackling current challenges such as high energy costs, unfair global competition, and the urgent need to reduce carbon emissions. At its core, the plan promotes decarbonisation while ensuring that Europe remains a competitive global player in steel production.
The steel and metals sectors are not only vital to the European economy but also play an essential role in critical industries such as automotive manufacturing, clean technologies, and defence. Given the geopolitical tensions in the world today, maintaining a strong and independent European steel industry is crucial for ensuring the security of the EU. The Commission has framed this initiative as a way to preserve jobs, foster innovation, and drive forward the EU’s climate-neutral goals, all while responding to the increasing pressures from global market distortions.
Key Challenges and Objectives
The steel industry is facing several urgent challenges that threaten its stability. Among these challenges are rising energy costs, unfair competition from countries with excess production capacities, and the need to modernise operations to meet stringent environmental standards.
The Action Plan seeks to address these issues through a range of strategic measures. The Commission aims to ensure affordable and secure energy supply for the industry, introduce mechanisms to prevent carbon leakage, protect Europe’s industrial capacities, and promote circularity within the sector. Furthermore, it intends to support a just transition for workers in the steel industry and encourage the development of low-carbon technologies.
Key Components of the Action Plan
1. Affordable and Secure Energy Supply
Energy is a significant component of production costs in the steel and metals sectors. To help alleviate these costs, the Action Plan includes initiatives to ensure a more affordable and secure energy supply. The Commission encourages the use of Power Purchase Agreements (PPAs), which can help stabilize electricity prices. Additionally, the plan calls for leveraging energy tax flexibility and reduced network tariffs to support energy-intensive industries.
One of the long-term goals of this part of the plan is to promote the increased use of renewable energy sources and low-carbon hydrogen in steel production, ensuring that these industries meet the EU's ambitious climate goals.
2. Carbon Leakage Prevention
To ensure that European industries remain competitive while contributing to global emissions reduction efforts, the Commission is taking steps to prevent carbon leakage. This term refers to the situation in which carbon-intensive industries relocate to countries with less stringent environmental regulations, undermining Europe’s efforts to reduce emissions.
The plan promotes the Carbon Border Adjustment Mechanism (CBAM), which aims to level the playing field by imposing tariffs on imported goods that do not meet EU environmental standards. By extending this mechanism to cover steel, aluminium, and their downstream products, the Commission ensures that non-EU industries cannot undermine the EU’s climate policies by producing goods with higher carbon footprints. Additionally, the Commission will review the CBAM later in 2025 to introduce anti-circumvention measures.
3. Protection of European Industrial Capacities
Global overcapacity in steel production has been a persistent issue, affecting the profitability and competitiveness of European manufacturers. In response, the EU has already implemented trade defence measures, including tariffs on imported steel. However, these challenges persist, and the Commission plans to introduce stricter protections for European steel makers.
A new long-term trade safeguard measure will be proposed before the expiry of current safeguards in mid-2026, ensuring that Europe’s steel sector remains shielded from unfair competition. Furthermore, the Commission is considering the introduction of the “melted and poured rule”, a mechanism designed to accurately determine the origin of metal goods and prevent circumvention of trade measures.
4. Promotion of Circularity and Recycling
A key part of the Action Plan is to promote greater recycling within the steel and metals industries. By improving recycling rates, the EU can significantly reduce energy consumption and emissions in the sector. The Commission plans to introduce targets for the use of recycled steel and aluminium in key sectors. Furthermore, it will assess the need for recycling or recycled content requirements for products such as construction materials and electronics.
Trade measures regarding metal scrap, a crucial input for decarbonised steel production, will also be considered to ensure sufficient availability of scrap for European manufacturers. This approach will make the industry more circular and sustainable while reducing reliance on raw material extraction.
5. De-Risking Decarbonisation
Decarbonising the steel and metals industries is one of the EU’s most challenging objectives. To overcome this, the Commission will introduce an Industrial Decarbonisation Accelerator Act. This act will set sustainability and resilience criteria for European products in public procurement, creating demand for low-carbon metals produced in the EU.
Additionally, the Commission has committed €150 million through the Research Fund for Coal and Steel for the 2026-2027 period, alongside €600 million through Horizon Europe to support the Clean Industrial Deal. The Commission will also create a €100 billion Industrial Decarbonisation Bank to facilitate the financing of low-carbon technologies. As part of this effort, a €1 billion pilot auction will be launched in 2025 to fund decarbonisation and electrification projects in key industrial processes.
6. Protecting Jobs in the Steel Sector
The steel and metals sectors employ nearly 2.6 million people across the EU, both directly and indirectly. Recognizing the importance of these jobs, the Commission’s Action Plan includes a focus on protecting quality industrial jobs through active labour policies. These policies will support skills development and help ensure fair job transitions, especially as the sector undergoes transformation due to decarbonisation efforts.
In addition, the European Fair Transition Observatory and the Quality Jobs Roadmap—part of the Clean Industrial Deal—will monitor the impact of these changes on employment and workers’ rights, ensuring that the transition to a low-carbon economy is fair and inclusive.
Strategic Background and Stakeholder Engagement
The Action Plan for the steel and metals sectors builds upon previous EU initiatives, including the Clean Industrial Deal and the Action Plan for Affordable Energy. The plan follows the strategic dialogue chaired by Commission President Ursula von der Leyen and the Commission’s Executive Vice-President in charge of Prosperity and Industrial Strategy, Stéphane Séjourné.
The Commission has also engaged stakeholders through discussions such as the Steel Dialogue, held on 4 March 2025. These discussions have shaped the plan’s measures, ensuring that the needs of the industry and the views of various stakeholders are considered.
Economic Impact and the Future of the EU Steel Industry
Europe’s steel industry is crucial to the EU’s economy, contributing around €80 billion to the GDP and providing significant employment. It is vital for sectors like automotive manufacturing, clean technology, and defence, making it a cornerstone of Europe’s industrial base. However, to maintain this position, the EU must navigate challenges like high energy costs, global competition, and the drive to meet climate targets.
The Action Plan provides a comprehensive framework to address these issues, ensuring that Europe remains a global leader in steel production while reducing its carbon footprint. By investing in clean technologies, promoting circularity, and ensuring a competitive marketplace, the EU aims to future-proof its steel and metals industries for decades to come.
KEY TAKEAWAYS:
• The European Commission’s Action Plan on Steel and Metals aims to enhance competitiveness and decarbonise the industry.
• Energy costs, unfair competition, and carbon emissions are major challenges addressed by the plan.
• The plan includes measures to promote Power Purchase Agreements (PPAs), renewable energy, and low-carbon hydrogen.
• Carbon Border Adjustment Mechanism (CBAM) will be extended to prevent carbon leakage and ensure a level playing field.
• Stricter trade defence measures will protect European steel from unfair global competition.
• The plan promotes circularity and recycling to reduce emissions and energy use in steel production.
• An Industrial Decarbonisation Accelerator Act will create demand for EU-produced low-carbon metals.
• €150 million is allocated to decarbonisation efforts, with additional funding through Horizon Europe and the Industrial Decarbonisation Bank.
• The steel industry employs 2.6 million people in the EU, and the plan includes measures to protect and transition jobs.
• The overall goal is to secure a strong, competitive, and environmentally sustainable steel and metals industry in Europe.
