| Publication |
2012.
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| Summary/Abstract |
In recognition of their competitive vulnerability, a set of special rules have been devised for managing sectors such as iron and steel within the EU ETS. Under these rules, the EU steel sector has received free allocations in excess of their compliance needs to now, and will continue to receive some free allowances up to 2020. However, perceptions of the sector's competitive vulnerability have been largely based on inherently hypothetical analyses which rely heavily on counterfactual scenarios and abatement cost estimates often provided by firms themselves. This paper explores how the three largest steel firms in the EU (AcerlorMittal, Corus, and ThyssenKrupp) have sought to strategically exaggerate their vulnerability to carbon pricing to the effect of an inefficient policy outcome. We conduct a qualitative assessment of two of the key narratives underpinning the competitive vulnerability argument of EU steel companies - lack of abatement opportunities and inability to pass through cost increases - based on interviews, case studies, and publicly available data. We find that these arguments provide only partial and weak justifications for competitive loss and preferential treatment under the EU ETS. The strategy however remains successful due to information asymmetry and the peculiar political economy of EU climate regulation.
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