A key challenge under the EU’s Clean Industrial Deal is how to create a market for products with low CO₂ emissions. The Industrial Accelerator Act, proposed in March 2026, considers giving preference to lower-emission materials in public procurement and public support schemes. For intermediate steel products, the environmental performance assessment under the Ecodesign for Sustainable Products Regulation (ESPR) could provide a key framework for determining which products qualify for such preferential treatment.
Under this framework, steel products would be classified from A to E based on their carbon footprints (CFPs). However, the proposed classification system remains under debate, including which steelmaking routes should qualify as “low-emission”, and whether other environmental aspects, such as resource circularity or energy use, should also be incorporated.
The assessment of steel products under the ESPR presents both new challenges and opportunities for Japan’s steel industry. Measuring the actual emissions of individual products will be important not only for compliance with the Carbon Border Adjustment Mechanism (CBAM), but also for demonstrating the value of Japanese steel in public procurement and emerging markets for lower-emission steel. As Japan moves towards 2030, a key question will be how high-quality steel produced in large-scale electric arc furnaces can be recognized as “low-CFP steel” based on its actual emissions and successfully brought to market.
This report explains the EU’s proposed framework for assessing steel products, examines the main issues under discussion, and considers how Japanese companies can make use of these policy developments.
＜Table of Contents＞
1. Introduction
2. Circular Economy and Ecodesign Regulation
2.1 ESPR as a Circular Economy Policy
2.2 Life-Cycle Thinking and Products Aspects
2.3 Performance and Information Requirements
2.4 Iron and Steel Products Identified as a Priority Product Group
2.5 Creating Markets for Low-Carbon Products through the Industrial Accelerator Act
3. Classes of Environmental Performance: The JRC proposal
3.1 Overview of the JRC Draft Report
3.2 Designing Performance Classes Based on Product Carbon Footprints
3.3 Covered Products and System Boundaries
3.4 Reference Installation Scenarios
3.5 What Do Performance Classes A–E Represent?
3.6 The Policy Significance of Performance Classes
4. Key Points of the JRC Draft Report
4.1 Do the Performance Classes Encourage the Transition to Low-Carbon Steelmaking?
4.2 Limitations of Using the Product Carbon Footprint as a Single Indicator
4.3 CBAM Default Values and the Assessment of Imported Products
4.4 How to Include Scrap Use in the Assessment Framework?
5. What Japan Needs to Do: From GX Steel to “Low-PCF Steel”
5.1 “Low-PCF Steel” Rather than GX Steel
5.2 Moving from Default Values to Actual Emissions Data
5.3 Public Procurement and the IAA: Creating Demand for Low-Carbon Steel
5.4 Making Use of Japan’s Transition to Large-Scale Electric Arc Furnaces
Bibliography
Report Strengthening Competitiveness through Decarbonization: Recent Trends in European Industrial Policy and Implications for Japan’s GX Strategy (9 July 2025)
Special Contents Heavy Industry Decarbonization
