Steel : position on the draft revision of the CAFE standards
In line with the European electrification plan, hydrogen-based direct reduction (H₂-DRI) combined with electric arc furnace (EAF) technology is emerging as the essential technological path (alongside scrap maximisation) for Europe to maintain competitive and sovereign steel production in the medium and long term. A transition that would consist of replacing blast furnaces only with EAFs, without providing for sovereign production of DRIs, would amount to making the ecological transition a factor in the relocation of a major part of the steel value chain, and to strengthening our strategic dependencies. Concrete H2 DRI projects are emerging across Europe. They respond to existential challenges for the Union. The European regulatory framework must finally reflect the strategic imperative of this production route, and the steel flexibility provided for in the revision of the CAFE standards is a unique opportunity in this respect.
Depending on how this flexibility is sized and designed, it can empower the European steel base for its reinvestment and transformation, just as it could maintain short-term rents on depreciated without altering in any way the dynamics of industrial offshoring. It is in this context that France Hydrogène makes the following recommendations on the design of the flexibility of the CAFE standards:
- Recommendation n°1: for the primary steel part, define the “green steel” of the automotive lead market as DRI using a maximized share of renewable or low-carbon hydrogen:
✓ In the ESPR: lower the emissions ceiling for class A eligibility, to 0.7 tCO2/t finished steel (HRC).
✓ In the CAFE regulation: refer to the classification from the ESPR and specify that only emission class A is eligible for the lead market. - Recommendation n°2: Require the completion of the DRI stage in Europe for the qualification of “Made in EU” steel (Article 7 of the IAA).
- Recommendation n°3: maintain the steel flexibility of the lead market at 7%.
- Recommendation n°4: bring forward the lead market to 2030, with an initial flexibility of 2%, gradually rising to 7% in 2035.