UK Steel - Submission to the UK ETS Free Allocation Review

March 2024

UK Steel welcomes the opportunity to respond to the consultation on UK ETS Free Allocation. As steelmaking is a very carbon-intensive process, carbon pricing and free allocations significantly impact the industry’s ability to operate in the UK and its overall competitiveness.

The Government must take a careful and considered approach to changes to free allocation in this review. Changes to free allocation will have huge implications for steelmakers and greatly affect their competitiveness. Considering the joint pledge between Government and Tata Steel UK to invest in new electric arc furnaces (EAF) to place the existing blast furnaces and British Steel published plans to switch to EAFs, this transition must be managed carefully. Sudden and rapid reductions in free allocations could jeopardise the new Net Zero steel investments by imposing unexpectedly high carbon costs.