Paying the full price of steel - Perspectives on the cost of reducing carbon dioxide emissions from the steel industry

This study examines the impacts felt downstream of carbon pricing and investments made in CO2 abatement within the steel industry. Using the supply of steel to a passenger car as a case study, the effects of a steel price increase on cost structures and price at each step of the supply chain were assessed. Since the prices of emission allowances under the European Union Emissions Trading System fall well below those required to unlock investments in low-CO2 production processes in the integrated steelmaking industry this paper seeks to pave the way for a discussion on complementary policy options. The results of the analysis suggest that passing on the compliance costs of the steel industry would have only marginal impacts on costs and prices for the end-use sectors (e.g., on the production cost or selling price of the passenger car). Under the assumptions made herein, at a carbon price of 100 €/tCO2, the retail price of a mid-sized European passenger car would have to be increased by approximately 100-125 €/car (<0.5%) to cover the projected increases in steel production costs.