SteelWatch

Three steelmakers received EUR 25.7bn in free ETS allowances but committed only EUR 3.2bn in net decarbonisation investment

As EU steelmakers pile pressure on the European Commission over the future of the Emissions Trading System (ETS), our analysis of the Union’s three largest steelmakers — ArcelorMittal, thyssenkrupp and voestalpine — found that the free allocation value they received has not been matched by comparable investment in decarbonisation. The gap documented suggests that prolonging free allocation further would be counterproductive for investment in decarbonisation. 

Brussels, July 2, 2026 —  As EU steelmakers pile pressure on the European Commission over the future of the Emissions Trading System (ETS), our analysis of the Union’s three largest steelmakers — ArcelorMittal, thyssenkrupp and voestalpine — found that the free allocation value they received has not been matched by comparable investment in decarbonisation. The gap documented suggests that prolonging free allocation further would be counterproductive for investment in decarbonisation. 

The analysis compares the value of free ETS allowances received by the EU’s three largest steelmakers with the decarbonisation investments they committed in the first half of EU ETS phase IV, 2021 to 2025.

Key findings include:

  • EUR 25.7 billion in free ETS allowances received by the three steelmakers
  • Only EUR 3.2 billion in net decarbonisation investment committed
  • EUR 8 of free allocation received for every EUR 1 of net investment
  • EUR 22.5 billion reinvestment deficit
  • ArcelorMittal committed less than 5% of its received free allocation value to decarbonisation investment. 
  • thyssenkrupp and voestalpine received free allocation worth roughly seven and two times their respective net investment.

The findings come as ArcelorMittal, thyssenkrupp Steel and voestalpine call for a “temporary pause in ETS cost escalation“.

“Free allocation is not driving the sector’s transition: it suppresses the very price signal the EU ETS relies on to compel investment, prolonging the economic viability of emissions-intensive manufacturing and starving decarbonisation efforts. This makes the case for phasing out free allocation as planned.” said Constantin Johnson, Steel Analyst at SteelWatch. 

Some steelmakers argue that more free allocation is needed to support investment. Our findings suggest the opposite. The evidence indicates that increasing the planned supply of free allocation is unlikely to drive greater investment in decarbonisation.

“EU’s steel transition will not be delivered by weakening the policies designed to drive it. If policymakers respond to calls for more free allocation, they risk prolonging dependence on high-emissions production rather than accelerating investment in low-emissions steel. The EU ETS should drive decarbonisation, not delay it,” said Caroline Ashley, Executive Director at SteelWatch.

END

Notes

You can find the full brief “Free allocation is not driving investment in steel decarbonisation“ here.

Contact

Constantin Johnson
Steel Analyst, SteelWatch (Sweden, CEST)
[email protected]
(+46709642879)

Gözde Incegul
Communications, SteelWatch (Turkey, CEST +1)
[email protected] 
(+90 537 583 5442)

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