Lakshmi Mittal, executive chair of Arcelor Mittal, argues the EU's emissions trading system fundamentally fails energy-intensive industries despite its climate ambitions. The policy, designed to price carbon and drive decarbonisation, faces mounting pressure as the European Commission signals willingness to relax rules for sectors struggling to compete.

The ETS has achieved notable success in power generation, where emissions fell 49% between 2005 and 2023 as renewable technologies became commercially viable. However, steel and other heavy industries lack essential decarbonisation enablers: competitive electricity prices, affordable green hydrogen, carbon contracts for difference, and carbon capture infrastructure. Without these foundations, companies cannot justify investments in cleaner production.

Mittal warns that by the early 2030s, steel production costs in the EU could rise 50% under current ETS rules, assuming a €150 carbon price. This surge threatens to reduce EU manufacturing activity by 30-40% and eliminate up to 5 million jobs across the value chain. The competitiveness gap widens as Europe remains virtually alone in imposing significant carbon costs.

The solution requires pausing ETS expansion until decarbonisation pathways become economically viable. Recent steps like the carbon border adjustment mechanism show progress, but without addressing export competitiveness and ensuring ETS revenues fund industrial transformation, the EU risks hollowing out its manufacturing base rather than building climate resilience.