Why Europe Needs an Ambitious and Credible Label for Low-Emission Steel

Brussels, 29 June 2026 - Europe is entering a decisive phase in the transformation of its steel industry. Over the coming months, policymakers will define the criteria for a European label for low-emission steel under the Ecodesign for Sustainable Products Regulation (ESPR). Throughout the current policy debate, this is commonly referred to as the "low-carbon steel label."

The decisions taken now will influence investment, market demand and ultimately the pace of industrial decarbonisation. A credible label should do more than describe products. It should create market incentives for climate-friendly production, provide customers with reliable information and reward companies that invest in reducing greenhouse gas emissions. If designed well, it can become an important driver for Europe's industrial transformation.

Europe Needs Both Production Routes

The transition towards climate-neutral steel requires contributions from all production routes.

Electric arc furnace (EAF) production already plays a vital role in Europe's circular economy by recycling steel scrap. However, recycling alone will not be sufficient to meet Europe's future steel demand. Many high-quality steels used in sectors such as automotive, infrastructure, energy systems and defence will continue to depend on primary steel production based on iron ore.

The question, therefore, is not whether Europe needs primary steel production, but whether this steel will be produced in a climate-friendly way in Europe. Strengthening industrial resilience, technological sovereignty and secure supply chains requires continued investment in the decarbonisation of the primary route. This includes investments in Direct Reduced Iron (DRI), renewable electricity and, in the future, hydrogen-based steelmaking.

To enable these investments, companies need a market that recognises and rewards low-carbon products. This is precisely why credible standards and lead markets are so important.

A Label Should Reward Genuine Decarbonisation

The purpose of a low-carbon steel label is not simply to classify products. It should distinguish genuine frontrunners from conventional production and create incentives for further emission reductions.

If emission thresholds are set too generously and almost every European steel product qualifies as "low carbon", the label risks losing its credibility and its ability to drive investment. Ambitious but achievable thresholds are therefore essential to ensure that companies investing in decarbonisation are recognised in the marketplace.

Designing a Label that Reflects Technical Realities

An effective labelling system should recognise measurable progress while reflecting the technical realities of steel production.

LESS's approach has been based on a sliding scale, which recognises that different production routes start from different emissions profiles and rewards further reductions within each route. Scrap-based production already benefits from comparatively low emissions and can reduce these further through renewable electricity. The primary route starts from a different position but also offers substantial decarbonisation potential through DRI, renewable electricity and hydrogen.

At the same time, the ongoing policy discussion has highlighted the potential of a segmented approach, for example by distinguishing between different steel product categories. Such an approach can contribute to a pragmatic and workable solution.

However, it is crucial that the technical realities of steel production are taken into account. While many steel products can be manufactured via both production routes, some high-grade steels continue to depend on the primary route. Any labelling system should therefore recognise and incentivise decarbonisation across all relevant production pathways.

Product Carbon Footprints Remain Essential

The product carbon footprint (PCF) remains a fundamental element of any credible low-carbon steel label.

However, current accounting methodologies allocate emissions from primary steel production almost entirely to the first life cycle of the material. As a result, recycled steel products often receive significantly lower carbon footprints. While this reflects the accounting methodology, it should not obscure the fact that primary steel production remains indispensable for supplying future generations of scrap.

A robust labelling framework should therefore encourage emission reductions wherever they occur and support continuous improvement across the entire steel value chain.

Creating Lead Markets for Low-Carbon Steel

Europe's steel transition requires more than technological innovation. It also requires markets that reward climate-friendly production.

This means ambitious thresholds, transparent and harmonised calculation methodologies, and stronger recognition of low-carbon steel in both public and private procurement.

LESS contributes to this objective through a technology-neutral methodology that enables transparent greenhouse gas assessment while recognising continuous decarbonisation efforts across different production routes.

The Time to Act Is Now

Europe has already begun investing in low-carbon steel production. The first large-scale DRI plants will start operating in 2027. Further investment decisions will depend on whether climate-friendly products receive adequate market recognition.

Europe does not need a debate about winners and losers in the steel transition. It needs a credible framework that supports investment, rewards measurable emission reductions and creates confidence for producers and customers alike.

Whether implemented through a sliding scale, a segmented model or another robust approach, a European low-carbon steel label should remain technology-neutral, scientifically robust and capable of recognising meaningful decarbonisation across the steel industry. Only then can it help build competitive lead markets and accelerate the transition towards a resilient and climate-neutral European steel sector.

This article is an expanded and updated version of an opinion piece originally published by Table.Media in ESG.Table on 24 June 2026 and in Europe.Table on 25 June 2026. The original articles are available here: Standpunkt: Das europäische CO2-Label für Stahl muss ambitioniert und fair sein • Table.Briefings and Opinion: The European carbon label for steel must be ambitious and fair • Table.Briefings.