EU Moves to Curb Carbon Leakage with New Steel Import Limits
The European Commission has unveiled a new proposal to shield the EU steel industry from global overcapacity — but behind the trade measures lies a broader climate goal: keeping emissions and clean investment within Europe.
The plan would sharply limit tariff-free steel imports to 18.3 million tons per year, nearly 50% below current levels, and double out-of-quota duties to 50%. A new “Melt and Pour” rule would trace where steel is actually produced, closing loopholes that allow higher-emission imports to enter the EU market through intermediaries.
While framed as a response to unfair competition, the proposal also reflects growing concern over carbon leakage — where industries relocate to regions with weaker climate standards. Steelmaking is one of Europe’s most energy- and carbon-intensive sectors, and the Commission argues that cheap, coal-based steel from abroad undercuts both EU producers and the bloc’s decarbonisation goals. Global overcapacity, it says, is now more than five times Europe’s annual consumption.
President Ursula von der Leyen called a “strong, decarbonised steel sector” essential for the EU’s competitiveness and strategic autonomy. The move complements the Carbon Border Adjustment Mechanism (CBAM) and signals a wider effort to align trade and climate policy. Rather than offshoring emissions through imports, the EU aims to decarbonise steel at home — using cleaner energy, hydrogen-based direct reduction, and electric arc furnaces powered by renewables.
By tightening market access, Brussels aims to prevent carbon leakage — where Europe cuts emissions at home but relies on imported, high-carbon materials. The proposal is now before the European Parliament and Council, with the Commission pushing for swift adoption before the existing safeguard expires in 2026.