The implementation of the EU Emission Trading Scheme ( ETS) started on January 1(st) 2005 according to national plans for allocating emissions rights. The steel industry is one of the industrial sectors included in this scheme. The objective of this paper is to investigate and evaluate the optimum solution( s) for European steel plants to meet their emission allowance with low reduction cost. An optimization model based on a Swedish steel plant is developed and used. Three scenarios were created in the model, i. e., internal changes within the steel plant, EU ETS, and the Kyoto Protocol's clean development mechanism ( CDM). For the last scenario, China was selected as a country of the non- Annex I Party for the emission trading by CDM. The modeling results show that the studied plant will face an emission gap between allowed and calculated emissions in the near future. Compared to EU ETS, the implementation of CDM projects will make the plant reduce CO2 emissions at a lower cost. The internal changes within the plant will also play an important role for the solution of low abatement cost. The model developed could serve as a benchmark for the future emission trading simulation's purpose within the European steel industry.