Euro-Carbonomics: Global Steel Companies Respond

The European Union's new carbon regulations are shaking up supply chains. This drives big companies towards sustainability—which is a good thing, but it comes with strings attached.

The EU's Corporate Sustainability Reporting Directive (CSRD) forces companies to disclose emissions data, including those from suppliers. This means more reporting, more auditing, and more scrambling to prove compliance.

By 2026, The Carbon Border Adjustment Mechanism (CBAM) will require importers to pay for carbon emissions at EU rates, ensuring foreign goods don’t undercut European manufacturers. The mandate targets high-emission industries like steel, aluminum, and cement.

Importers began reporting emissions in 2023, and by 2026, they’ll have to buy CBAM certificates linked to EU carbon prices. In theory, this levels the playing field. In practice? Expect price hikes and logistical headaches.

Companies exporting into the EU must measure, report, and pay for their emissions—or risk higher tariffs and reduced market access. Many in the US are pushing for a US carbon tax to even the playing field (because nothing says "business-friendly" like more taxes).

Global steel producers are responding…

• ArcelorMittal has delayed its green steelmaking investments in Europe, citing insufficient EU policy support and concerns over CBAM's effectiveness. CEO Aditya Mittal emphasized the need for a stable regulatory environment to enable decarbonization and competitiveness.
• Meranti Green Steel is investing in low-carbon steel production, anticipating a competitive edge as CBAM imposes tariffs on high-carbon imports. Their $2 billion project in Thailand aims to supply green steel to Europe, aligning with CBAM's objectives.
• Tata Steel is developing tailored decarbonization plans for its European operations, focusing on the demand for low-carbon steel products and regulatory developments in the region. The company is evaluating various technology solutions to reduce CO? emissions in its steel production processes.

The European Commission estimates CBAM could generate €9 billion annually by 2030. Steel and aluminum importers could see cost increases of 20-30% due to carbon pricing. Meanwhile some countries argue that CBAM acts as a trade barrier, putting emerging markets at a disadvantage.

European automakers like Volkswagen and BMW are pressuring suppliers to cut embedded carbon in aluminum and steel to comply with CBAM. Siemens is investing in AI-driven energy management to help suppliers reduce their emissions and meet reporting requirements. And of course, SAP, IBM, and Microsoft are marketing carbon accounting software to help businesses navigate CBAM compliance.

Yes, CBAM adds costs and complexity, but it also forces companies to innovate. Businesses investing in renewable energy, carbon capture, and electrification will be ahead of the curve. Laggards will be paying extra for the privilege of keeping things the same.

This dynamic creates big opportunities for multiple tech categories, including the aforementioned sustainability technologies, as well as AI-driven supply network optimization solutions (more here). Looking for one of those? Let’s talk.