The European steel sector has declared an existential crisis. In response, the EU is preparing an Action Plan to secure a competitive and decarbonised steel and metals industry in Europe. This is a document that Indian steel stakeholders would be well advised to study: what are the likely impacts on India, and what examples might India consider for its own policies?
Crisis in Europe’s Steel Industry
Germany’s Thyssenkrupp has serious profitability concerns and has announced the lay-off of 11,000 people. In Europe, ArcelorMittal has also seen profits decline, is delaying investments, and has announced lay-offs of 600 employees in France. The sector faces a triple crisis: global overcapacity driven by China, rising energy costs often exceeding EUR 100 per MWh, and the challenge of decarbonisation. This is better characterised as a three-dimensional crisis, because of the tensions as well as synergies between its different causes. Not least among these tensions is that rising EU ETS carbon market costs and a not-yet-effective CBAM make the European steel industry hesitant to undertake any investments.
Inside the EU’s Action Plan
The Action Plan is a direct response and outlines how the EU thinks it can chart a way forward through the three dimensions of change. It is a combined sectoral vision that links EU policies in the Clean Industrial Deal, ETS, CBAM, investment de-risking, the circular economy, and bans on scrap exports. It is shaping current work in Brussels to widen and strengthen the CBAM to cover emissions from upstream precursors and from electricity supply. It proposes measures to reduce industrial electricity prices via renewable energy PPAs, energy tax flexibility, and reduced network tariffs. It will form part of new rules on green public procurement and ‘lead markets’, and on state aid subsidies. By mid-2026, it will result in legislation summarised as a “new long-term measure to maintain highly effective protection of the EU's steel sector”.
Crucially, the Action Plan emphasises the EU’s determination to develop its scrap-steel recycling potential into low-carbon or green steel production using electric arc furnace technologies. It plans to improve scrap collection from vehicles and regulate to facilitate the easy flow of scrap steel between EU countries. Since May 2024, the EU has banned the export of waste, including iron and steel scrap, dross, and scalings. From July 2025, a customs surveillance system will monitor all imports and exports of metal waste and scrap into and out of the EU.
Scrap Onshoring and Its Global Ripple Effects
All of this has knock-on effects for developing economies. The most immediate impact is the European onshoring of steel scrap, which will cripple opportunities for renewable-power-based electric arc furnace green steel to develop in growing markets such as India. Instead, India will likely continue to produce high-emissions-intensity steel. In short, despite the EU’s sincere climate commitment to emissions reduction, the likely—if unintentional—result is increased emissions at the global level.
The EU is also pouring public money into finance for decarbonised steel investments. In just a few years, the EU and European countries have committed EUR 15.1 billion in direct capex financial support to low-carbon steelmaking. Germany accounts for almost half of the total subsidy. In addition, there are many other opex support schemes, such as carbon contracts for difference, a loan facility at the European Investment Bank, and green hydrogen support schemes. The Action Plan makes clear that this support will continue and be encouraged.
Finally, the Action Plan also outlines plans to expand the EU’s research fund for coal and steel to include research on defence applications and to support technology deployment projects, including in the steel industry.
Big Bets on Decarbonisation Finance and Technology
India needs to consider how to respond. As it stands, the EU Action Plan may hamstring important aspects of India’s steel decarbonisation strategy. It may also offer policy lessons that India could adopt.
A more ambitious response, however, would be to insert bilateral co-operation on steel decarbonisation into the ongoing EU–India negotiations on a free trade agreement and (perhaps) a ‘green chapter’ in an investment agreement. This approach could include collaborations in research, financing, access to green lead markets, and scrap.
The European Commission President, Ursula von der Leyen, has announced that “Next-generation, clean steel should be manufactured in Europe. That means we have to help our steelmakers who are facing strong headwinds on the global market.” It therefore falls to India to bring bigger and bolder ideas that can serve truly global outcomes. The window of opportunity to engage with the EU is now.
(Sangeeth Selvaraju, Policy Fellow at the Grantham Research Institute, London School of Economics. Jesse Scott, Senior Fellow at the Observer Research Foundation.)
Views are personal, and do not represent the stand of this publication.
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