EU Court ruling casts shadows on Europe’s largest steelmaking plant

The EU Court of Justice (ECJ) has ruled that operations at Italy’s Ilva plant in Taranto – Europe’s largest steelmaking complex – must be suspended if they continue to “presents serious and significant dangers to the environment and human health”, as they would breach the bloc’s industrial emissions rules as well as its Charter of Fundamental Rights.

Ilva has been entangled in one the most serious environmental pollution cases in the country for over a decade now. Troubles at the Italian steel maker started in 2012 after an investigation found that the Taranto plant – the group’s largest – was emitting high levels of dioxin, which were correlated with an abnormally-high incidence of cancer in the area, leading to the seizure of the plant by the Italian state.

A government decree, though, allowed production to continue due to the plant’s economically strategic nature – with the industrial complex employing almost 12,000 workers from an extended portion of Italy’s southern regions.

In September 2022, however, a Milan court referred a new case related to llva’s Taranto plant to the ECJ – having taken up an appeal brought by the association Genitori Tarantini (Parents of Taranto) and an 11-year-old child suffering from a rare genetic mutation in 2021.

The association was contesting the waivers extended to Ilva over the years to allow its operations to continue despite the environmental requirements – including operational upgrades – that had been prescribed to tackle the industrial plant’s health- and pollution-related impact.

As the association cited the EU Industrial Emissions Directive as part of its appeal, the Milan court was seeking clarifications around the interpretation of the legislation.

The law sets limits and controls on polluting emissions from industries that can cause environmental or human harm. First laid out in 2010, the rules were recently updated as part of the bloc’s Green Deal, to tighten enforcement and bring mining, large-scale battery production, and livestock rearing under its scope – although NGOs said the review failed to introduce stronger polluter’s responsibilities over harmful emissions.

The ECJ clarified said on Tuesday (25 June) that, while according to the Italian government, the Directive makes no reference to the assessment of damage to health, the concept of pollution within the meaning of that legislation does indeed include damage both to the environment and to human health.

Thus, the Luxembourg-based court said, the assessment of the impact of a plant’s activities on those two aspects must be integrated in the procedures for granting and reviewing operating permits.

The ECJ emphasised that in the event of a breach of the conditions of any such permit, the operator must immediately take measures to ensure that all parts of a plant are restored to compliance with those conditions as soon as possible.

According to the Court, in the event of serious hazards, the time limit for applying the protective measures provided for in the operating permit cannot be repeatedly extended – and the operation of the installation must be suspended.

The Italian case, the ECJ said on Tuesday, would have so far failed to assess health damage for the purpose of granting operating permits’ extensions and waivers, and would have only considered one set of pollutants.

The case will now be passed back to the Business Court of Milan, as the ECJ does not settle the dispute itself but only provides input on EU law interpretation.

Casting dark shadows on Italy’s steel industry

The EU court also highlighted that the EU law targets the close link between the protection of the environment and human health, which are also key objectives of the bloc’s Charter of Fundamental Rights, it said.

The ECJ’s ruling could spell major trouble for a sector that has written the history of European industrialisation and mass employment – but that now faces severe uncertainty as to where to find the funds to tackle the social and operational costs of the transition towards more sustainable energy sources.

More broadly, the case in question pitches environmental and sustainability principles against the continent’s economic structures, and millions of jobs with it.

While countries with deeper pockets like Germany and France have been able to redirect billions into greening their heavy industries through state aid since rules were relaxed after the COVID 19 pandemic, others, including Italy, struggle to work out how to support energy-intensive sectors and their workers while funding a costly energy transition.

Restrictions to the Taranto plant would partly affect the other Ilva complexes across the rest of the country, which are mainly responsible for processing the steel produced in Taranto. Italian industry umbrella association Confindustria estimated total compensation costs for the state at up to 1 billion euros for almost 25,000 workers.

The Italian steel industry is the second largest in Europe after the German sector – and is to date one of the biggest contributors to the country’s economy, employing an aggregate 70,000 workers for a total production of 21.1 million tonnes in 2023, according to data from sector association Federacciaio.

Ilva’s fate still up for grabs

The industrial heavyweight was privatised in 1995 with the purchase by the Riva Group.

Following the start of the legal case against the Taranto plant, in 2013, the Italian government intervened with a decree for commissarial management, following up with the approval of an environmental plan for the industrial complex in 2014.

In 2015, the steel plant went into receivership and was assigned in 2017 to ArcelorMittal, the world’s second largest steel producer that emerged from the 2006 merger of Franco-Spanish-Luxembourg Arcelor and Indian giant Mittal.

In 2018, Arcelor Mittal signed an agreement with the trade unions to sell the plant, but in 2019 the group attempted to withdraw from the contract.

In 2020, an agreement was reached on a new governance arrangement that saw Invitalia (a fully state-owned enterprise for investment and development) enter the share capital of AM InvestCo Italy – later renamed Acciaierie d’Italia – which was in turn set up to manage Ilva’s shift to special administration.

In 2021, Invitalia’s stake in Acciaierie increased to 50% of voting shares, as the state looked to safeguard a strategic sector and its related workforce in the economically troubled southern regions “with the aim of repurposing and re-launching Ilva’s steel complex” in line with the EU’s net-zero 2050 strategy, it said at the time.

On 31 May 2021, the District Court of Taranto sentenced Fabio and Nicola Riva, former owners and directors of Ilva, to 22 and 20 years in prison, respectively, among the 47 defendants (44 people and three companies) in the steel plant’s environmental pollution trial.

In 2022 a planned increase of the state participation was postponed to 2024.

However, in 2023, ArcelorMittal and Invitalia failed to reach an agreement on recapitalisating the company – with no solution in sight to date. This could mean the government might once again activate receivership as it looks for new private investors.

*Additional reporting by Donagh Cagney

[Edited by Anna Brunetti/Zoran Radosavljevic]

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