U.S. steel executives favor carbon border adjustment to combat 'dirty' imports

U.S. steel industry executives said on Tuesday they favor a carbon border adjustment mechanism that raises the U.S. price of "dirty" steel produced in China and other countries with high carbon emissions.

U.S. steel producers claim to have the world's lowest carbon emissions and told a news conference that a trade arrangement to be negotiated between the United States and Europe Union to restrict market access for steel with high carbon intensity would provide them with a comparative advantage.

Plans for the future arrangement were announced over the weekend as part of a deal to end a long running transatlantic trade dispute.

"We envision, subject to negotiations between the governments, some type of a trade measure that takes into account the differential carbon intensity and that will that will be beneficial for us," Kevin Dempsey, president of the American Iron and Steel Institute, one of the industry's two major trade groups.

Dempsey said he believed the carbon-based trade measures could provide U.S. and EU leverage to push China to reduce chronic excess capacity, but it is unclear how effective that can be.

"The Chinese industry benefits not only from weaker environmental standards, you have government subsidies or government ownership. There's a whole series of ways in which the Chinese government provides unfair competitive advantages to the steel industry of China," he said.

More than 70% of American steel is produced in electric-arc furnaces (EAF), which melt mostly scrap steel rather than smelting iron ore in coal-fueled blast furnaces, the method prevalent in China.