Climate and Competitiveness Border Carbon Adjustments in Action 2025

Apart from technological shifts, S Group has adopted a “shadow carbon pricing” mechanism – an internal carbon price of $20–30 per tonne of CO2 – to evaluate all new capital expenditure projects. This mechanism creates a financial incentive for lower-carbon choices, supported by a switch to an advanced MRV system.Views diverge on the optimal pace of transition. While leaders at large enterprises, such as S Group, view BCAs as a catalyst for modernization, many others advocate for a more gradual, state-supported approach that prioritizes economic stability. Corporate strategies for managing carbon and BCA exposure TABLE 2 Risk category Type Timeline Severity of impact BCA carbon costs Direct Future High MRV admin burden Direct Current Medium National ETS costs Direct Current High Scrap metal supply Indirect Current Medium Clean power access Indirect Current High Categories, types and severity of carbon-related risks for trade-exposed companies in the steel industryTABLE 3 Source of risk Corporate strategy Policy support needed Technology and capital Invest in EAF, H2-DRI, CCUS pilotsGreen transition fund and CCfDs for first-of-a-kind projects Carbon pricing Internal carbon price Clear national ETS timeline and predictable price signal Regulatory complexityBuild internationally aligned MRV system MRV equivalency protocols with key trading partners Supply chainDiversify export markets; develop green products Build scrap collection infrastructure Note: H2-DRI = hydrogen-based direct reduced Iron; CCfD = carbon contract for difference Key takeaways and potential actions –Short term (1–3 years): Based on these insights, corporates in trade-exposed sectors can consider focusing on building resilience in the short term. This includes investing in best-in-class digital MRV systems and conducting third-party verified life-cycle assessments for key products. Companies can also integrate an internal carbon price into all capital budgeting decisions. For companies exposed to the EU CBAM, the EU ETS price – currently around €80/tCO2 (as of November 24 2025)43 – can serve as a natural reference point to guide investment and operational decisions. –Long term (3–10+ years): In the medium-to-long term, the strategy must shift to transformation. This involves developing a clear technology roadmap for phasing out legacy assets, scaling up investments in low-carbon technologies such as EAFs and forming research and development consortia for solutions such as hydrogen and carbon capture, usage and storage (CCUS) (see Tables 2 and 3). Climate and Competitiveness: Border Carbon Adjustments in Action 12