The US-EU green steel deal: Climate breakthrough or lipstick on a pig?

Energy Monitor
January 13, 2022
By Dave Keating & Justin Gerdes

US President Joe Biden was handed a number of ticking time bombs by his predecessor Donald Trump. One of them was an ongoing trade war with the EU, in which Trump had slapped tariffs on imports of steel and aluminium from Europe in 2018. The EU in turn launched retaliatory tariffs on everything from blue jeans to whiskey, and filed a complaint at the World Trade Organisation (WTO).

Although the EU was hopeful Biden would rescind Trump’s tariffs, the fear of political blowback from the US steel industry, a powerful force in key swing states, has kept him from doing that. The European Commission, in turn, maintained it would not rescind the retaliatory tariffs and WTO challenge unless the US scrapped its tariffs. This deadlock lasted until autumn 2021, when Commission officials acknowledged they would have to change tack if they wanted to move forward on a transatlantic agenda and work together with the US in combatting state-funded overcapacity in Chinese steel mills.

Electric arc furnaces are used in 65% of steel production in the US but only 6% of production in China, where half of the world’s steel is made, according to Tucker and Meyer. The shift to electric arc furnaces means the US steel industry is 75–320% more carbon efficient than other global producers, finds consultancy CRU International in research commissioned by the non-profit Climate Leadership Council. The global producers that come closest to matching the US’s carbon efficiency are Canada and the EU. In Germany and Italy, electric arc furnaces account for 30% and 75% of steel production, respectively.