Tata Steel faces €685 million cost as green energy transition falters
Tata Steel must spend up to 685 million euros over the coming years to buy additional carbon emission allowances after falling behind on its green transition, according to an internal 2024 company document obtained by Follow the Money. This year alone, the company faces a 158 million euros expense.
The shortfall comes as the European Union reduces the number of free emissions allowances under the EU Emissions Trading System (EU ETS). Tata’s slow pace in modernizing its steel plant, combined with extensive maintenance in 2023, means only 68 percent of its emissions will be covered by free allowances this year.
“Companies that do not go green quickly are now truly feeling the pain of the European emissions trading system. The system works,” emissions trading expert Jos Cozijnsen told Follow the Money.
Tata Steel, the largest CO₂ emitter in the Netherlands, has historically earned hundreds of millions by selling surplus allowances. Between 2008 and 2019, the company earned 663 million euros from excess allowances. But production dropped sharply in 2023 after a major blast furnace overhaul delayed output by six months. The company reported a 556 million euros loss that year.
The internal board note reportedly warned of two difficult options: purchase additional allowances or reduce steel production from 7.2 million tons to 4.9 million tons. According to Follow the Money, rising carbon prices make buying allowances costly; a ton of CO₂ that cost 4.64 euros in 2017 now costs 76 euros, with projections up to 149 euros by 2030.
The internal note also allegedly highlighted the risks of international competition. Exported steel, especially to the U.S., now requires purchased carbon allowances, while cheaper Chinese steel remains unaffected. Tata warns that without effective import tariffs, European steel producers “may hardly survive.”
Despite the challenges, Tata reportedly says production volume goals have not changed. The company recorded 153 million euros in emission rights costs in its latest annual report, signaling it will continue producing steel while covering the carbon costs.
The EU will gradually phase out free allowances by 2026, replaced by the Carbon Border Adjustment Mechanism (CBAM), which taxes exported steel for CO₂. But the measure may not fully protect European producers from cheaper imports.
