Europe faces a defining choice. As global competition intensifies, concerns about competitiveness are real: growth has been sluggish, and high energy costs continue to weigh on industry. As industrial jobs keep disappearing in Europe, some therefore argue that climate ambition has become a burden. That is the wrong question.
The real challenge is not whether Europe can afford ambitious climate policies, but how it can strengthen its industrial base and the associated welfare, while keeping the pace on our climate target.
With tools like the EU Emissions Trading System (ETS) and the Carbon Border Adjustment Mechanism (CBAM), Europe is not undermining competitiveness – it musts create the conditions for cleaner, more resilient industries that can compete on a global level playing field.
Carbon pricing is increasingly becoming a global norm. According to the World Bank, around 28% of global emissions are now covered by a carbon price across economies representing nearly two-thirds of global GDP, with new systems being introduced or considered in major economies around the world.
A strong carbon pricing, through Europe’s Emission Trading System (ETS) and Carbon Boarder Adjustment Mechanism (CBAM), is not a burden on European industry; it is what gives companies the confidence, the visibility and clarity, to invest in clean technologies and compete globally.
The stainless steel industry offers a clear example.
At Outokumpu, we produce stainless steel with a carbon footprint around 75% lower than the global average. We are also operating EU’s only chromium mine with 67% lower emission intensity, strengthening Europe's strategic autonomy at a time when supply chains are increasingly exposed to geopolitical risks.
This is not a trade-off between sustainability and competitiveness. It is proof that the two can reinforce each other.
Uncertainty around ETS puts investments at risk
Industrial decarbonisation requires long-term investment. Those decisions depend on policy predictability.
Whether a company invests in a new electric furnace, renewable power purchase agreement or circular production process depends on confidence that today's policy signals will still matter ten or fifteen years from now.
That is why a strong and credible EU Emissions Trading System (ETS) remains essential. Companies investing in low-emission technologies need confidence that Europe will maintain a clear and stable direction of travel.
Weakening the ETS would not strengthen competitiveness. It would delay investment and undermine Europe’s clean industrial leadership.
Europe should keep the ETS framework broadly intact to preserve investment certainty. That means maintaining the current linear reduction factor, continuing the phase-out of free allowances in CBAM sectors, keeping international carbon credits out of the system, and using ETS revenues more strategically to support industrial decarbonization and electrification.
Europe should reward companies that invest early in decarbonisation, not protect those that postpone it. The first movers have already taken risks. They need certainty that Europe will keep its commitments.
Close the gaps to strengthen effectiveness of CBAM
The Carbon Border Adjustment Mechanism (CBAM) is equally important.
European industry cannot be expected to pay for decarbonisation while competing against imports produced under less stringent environmental standards. A level playing field is a prerequisite for investment.
In stainless steel, we are already seeing CBAM help reduce the risk of carbon leakage. But the mechanism must now be strengthened.
Loopholes should be closed, anti-circumvention rules strengthened, and steel-intensive downstream products included as quickly as possible to prevent carbon leakage further down the value chain, while European benchmarks should be reduced to reflect best-in-class production in Europe.
Without these safeguards, Europe risks exporting investment while importing emissions.
Solve the energy problem with energy policy — not by weakening ETS
High energy prices remain a major challenge for European industry. But the solution is not weaker climate policy.
Recent years have demonstrated the risks of dependence on imported fossil fuels. By contrast, member states with access to clean domestic energy, such as Finland and Sweden, have been less exposed to geopolitical shocks and volatile fuel markets.
Europe should draw the right conclusion: strengthen internal energy markets, accelerate electrification and reduce dependence on fossil fuels.
These measures improve energy security, lower costs and support industrial decarbonisation at the same time.