Guidelines for green steel
upon the application ofthe mass balance approach
Version 2.0 | Revised October 2023

Table of Contents
1. Outline...................................................................................................................................... 2
2. Why is JISF proposing green steel applying the mass balance approach? ......................................... 2
3. Calculation of GHG emissions intensity for steel products .............................................................. 2
1) Methodology to be applied .......................................................................................................... 22) Requirements ............................................................................................................................. 33) Obtaining third-party certification ................................................................................................ 3
4. Calculation of GHG emission reductions ....................................................................................... 31) Methodology to be applied .......................................................................................................... 32) Requirements ............................................................................................................................. 3(1) Requirements of emissions reductions projects ........................................................................ 4(2) Time range of reduction project .............................................................................................. 43) Calculation of GHG emissions reductions ...................................................................................... 54) Management of multiple reduction projects ................................................................................. 55) Obtaining third-party certification ................................................................................................ 55. Supply of steel products with reduction certificates ...................................................................... 51) Methodology to be applied .......................................................................................................... 52) Requirements for internal management of emissions reductions.................................................... 6(1) Account setup and management ............................................................................................. 6(2) Calculation period .................................................................................................................. 6(3) Allocation period of emission reduction effect.......................................................................... 6(4) Geographic boundary ............................................................................................................. 63) Emissions reduction allocation (Issuance of certificates) ................................................................ 6(1) Allocation method .................................................................................................................. 6(2) Maximum allocations of emissions reductions to steel products ................................................ 6(3) Handling of steel products to which reductions are not allocated .............................................. 74) Obtaining third-party certification ................................................................................................ 76. Others....................................................................................................................................... 7Annex I Terms and Definitions ........................................................................................................ 8Revision History ............................................................................................................................ 91© 2023 The Japan Iron & Steel Federation, All Rights Reserved.

Guidelines for green steel upon the application of the mass balance approach
1. Outline
JISF proposes green steel upon the application of the mass balance approach. This is a method of poolinggreenhouse gas (GHG) emission reductions or CO2 emission reductions from emission reduction projects
with additionality implemented by companies, allocating the reductions to any product, and supplying steel
products with certificates that are capable of reducing customers’ Scope 3 emissions.
This method consists of three steps. First, calculate the GHG emissions intensity of the specific steel
products applying this method. Second, identify GHG emission reduction projects and determine their GHG
emission reduction amounts. Third, issue reduction certificates not to exceed the total GHG emission
reduction amounts and supply steel products with reduction certificates. All steps must be verified by thirdparty certification body.
This document clarifies the concept and the common rules of the method.
2. Why is JISF proposing green steel applying the mass balance approach?
JISF support’s Japanese government’s ambitious policy of achieving carbon neutrality by 2050 and will
aggressively take on the challenge towards carbon neutrality. At the same time, customers are moving
toward low-carbon and decarbonization throughout the supply chain, and steel companies are expected torespond to these needs.
However, many of the technologies for decarbonizing the steel manufacturing process are still in the longterm development stage, making it technically difficult to immediately supply steel products withsignificantly lower or zero GHG emissions intensity at this time. This is a common challenge worldwide.
Nevertheless, there is a growing demand for steel supply with reduced emissions from a wide range ofdomestic and international customers. During the long and difficult decarbonization transition period of thesteel industry, the mass balance approach is an important solution to exchange emissions reductions witheconomic value, enabling priority supply of green steel to customers who appreciate the value of thereductions. Many steel companies are beginning to adopt green steel brands or concepts upon theapplication of the mass balance approach.
JISF also positions the supply of green steel upon the application of the mass balance approach as anextremely important initiative in the transitional phase of the green transformation, to respond quickly andaccurately to customer needs and to ensure a continuous investment cycle for the development andimplementation of decarbonization technologies.
3. Calculation of GHG emissions intensity for steel products
1) Methodology to be applied
Calculate GHG emissions intensity without recycling effect of scrap complying with themethodology of ISO 20915 standard (JIS Q 20915: Life cycle inventory calculation methodology
for steel products). GHG emissions intensity calculated for EPD (Environment ProductDeclaration) or that specially calculated for this purpose are used, but both are values from2© 2023 The Japan Iron & Steel Federation, All Rights Reserved.

which the reduction effect of the GHG project has been excluded. CO2 emissions intensity may
also be used as emissions intensity.
2) Requirements(1) Use of actual data
The calculation uses actual data complying with ISO 20915 standard (JIS Q 20915). It is also
possible to use data excluding the impact of reduction projects.
(2) Time-related coverage
In accordance with the ISO 20915 standard (JIS Q 20915), primary data should be within 5 yearsof the year of calculation and secondary data should be within 10 years. If older data is used, itshould be clearly stated that the data is still valid and currently usable.
(3) Geographic coverage
In the calculation of GHG emissions intensity for steel products, product-specific manufacturing
processes are used as a geographic boundary. Alternatively, GHG emissions intensity for steel
products is calculated as an average value of an organization.
(4) Breakdown of GHG emissions intensity
The type of GHG gases included in the calculation results of the GHG emission intensity of steel
products should be clarified.
3) Obtaining third-party certification
The calculation should be verified and certified by a third-party certification body based on theISO 20915 standard (JIS Q 20915).
4. Calculation of GHG emission reductions
1) Methodology to be applied
Calculate GHG emissions reductions of the emissions reduction projects complying with themethodology of ISO 14064 standards (greenhouse gases). CO2 emissions may also be usedinstead of GHG.
GHG emissions reductions from reduction projects are calculated based on how much GHG
emissions have improved over a given time period after the application of the reduction projects,
relative to the status before the application of the reduction projects (pre-application condition).
The pre-application condition can be either actual results (referring to ISO 14064-1 standard) ora baseline or other method that can properly evaluate the pre-application condition (referringto ISO 14064-2 standard).
2) Requirements
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(1) Requirements of emissions reductions projects
All of the following requirements (i) through (iii) must be met.
(i) Must be reduction projects within the organizationReduction projects should, in principle, be implemented within an organization, provided thatthe project is planned by the organization itself, incurs additional costs, and is carried out
responsibly under a consistent framework. In addition, activities of subsidiaries/affiliates, etc.,
where the organization has sufficient control over the management of those companies, may
be included.
(ii) Projects must fulfill “additionality” requirements
A project with additionality refers to a project that would not be viable without the objective of
GHG emissions reductions and additional economic benefits, such as the sale of certificates forthe value of emission reductions.
Examples of projects with additionality includeProjects with technical innovations

Projects must meet criteria such as J-Credit Scheme, which are set by governments or
public authorities for the same purpose as additionality. (Reference: For example, the JCredit Scheme require that the payback period for a project is at least three years andthat running costs increase after project implementation.).

(iii) Actual reductions must be reasonably calculable
GHG emissions reductions from a project can be calculated as the improvement in GHGemissions over a certain time period after the project is applied, based on the pre-application
status of the project. It is necessary that the functions and boundaries before and after theapplication of the project are equivalent, and that each is reasonably calculated, as verified andcertified by a third-party certification body.
When using a methodology that alternatively assess pre-application conditions such as baselines,
the establishment of baseline emissions must be transparent, quantitative, and conservative interms of the selection of key factors such as approach, methodology, parameters, and datasources, and must be verified and certified by a third-party certification body.
(Reference information)
The Ministry of Economy, Trade and Industry (METI) has developed the technology roadmap fortransition finance in the steel sector to provide specific transition directions toward achievingcarbon neutrality in 2050 in certain industrial sectors, including steel. The roadmap includes a listof "low-carbon and decarbonization technologies for carbon neutrality.
(2) Time range of reduction project4© 2023 The Japan Iron & Steel Federation, All Rights Reserved.

(i) Certification periodThe period covered by the certification is the period during which the reduction projectis viable, i.e., the period during which internal credits can be generated.

The start date of the reduction project is allowed to be applied back to 2013 if therequirement in 4.2) (1) is maintained. However, the generation of internal credits is only
allowed up to the reduction effect of the previous year in which the verification is carriedout.

Conditions of 4. 2) (1) (i) through (iii) are the requirements for the continuation of thereduction project. Confirmation of the requirements of the reduction project should bemade for each of its emission reduction certifications. Projects must be terminated when
it becomes clear that one of the respective requirements is not met.

(ii) Calculation periodThe calculation period refers to the data period used to calculate GHG emissions
reductions of a reduction project.

The calculation period can be arbitrarily set for 3 months, 6 months, 1 year, etc., but themaximum period is 1 year.

(iii) Expiration date of internal creditThe expiration date of internal credits should be arbitrarily set and properly managed.

3) Calculation of GHG emissions reductions
GHG emissions reductions from a reduction project should be calculated based on the GHG
emission reductions before the application of the reduction project and how much GHG
emissions have been improved during the calculation period in 4.2) (1) (ii) after the applicationof the reduction project.
In doing so, GHG gas types included in the GHG emissions reduction calculation results should
be clarified.
4) Management of multiple reduction projects
If multiple reduction projects are implemented within the same time period, their effects maybe cumulated. However, GHG emission reductions should be calculated so as not to doublecount the effects of multiple reduction projects.
5) Obtaining third-party certification
Calculation results should be verified and certified by a third-party certification body.
5. Supply of steel products with reduction certificates
1) Methodology to be applied5© 2023 The Japan Iron & Steel Federation, All Rights Reserved.

Refer to the methodology specified in 5.4.2 Mass balance model of the ISO 22095 standard.
GHG emission reductions correspond to the 3.2.5 specified characteristic of the ISO 22095
standard and are subject to allocation.
GHG emission reductions to be allocated are separated from the manufacturing process, pooled
and managed within the organization, and allocated to any products. Products should be
supplied with a certificate of the emission reductions and a document stating the GHG emission
intensity of the steel products as calculated in 3. Calculation of GHG emissions intensity for steel
products.
Customers who purchase "Green steel upon the application of the mass balance approach” canreduce their company's Scope 3 emissions equivalent to the amount of the certificate. The
reduction certificates by themselves should not be distributed in the market.
2) Requirements for internal management of emissions reductions(1) Account setup and management
An account is used to accumulate and manage the emissions reductions from a reduction
project as calculated in 4. Calculation of GHG Emission Reductions.
In the account, appropriate control should be made over the balance between the reductions
from the reduction project and the reductions allocated to steel products, as well as theexpiration date of the reductions as specified in 4. 2) (2) (iii) Expiration date of internal credits.
(2) Calculation period
Refer to 4. 2) (2) (ii) Calculation period(3) Allocation period of emission reduction effect
Refer to 4. 2) (2) (iii) Expiration date of internal credits(4) Geographic boundary
Since GHG emission reductions are calculated and accumulated within an organization, they canbe assigned to any steel product manufactured within the same organization, even across sites.
3) Emissions reduction allocation (Issuance of certificates)(1) Allocation method
Organizations may issue certificates with GHG emission reductions withdrawing from the GHGemission reductions accumulated in the account and link them to any steel products by using amass balance approach. However, GHG emissions reductions exceeding the total amount ofreductions accumulated in the account cannot be allocated, nor can certificates be issued.
Also, the GHG gas type of allocation should be clarified.
(2) Maximum allocations of emissions reductions to steel products
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No more GHG emissions reductions must not be allocated to steel products than their GHGemissions intensity.
The maximum emission reductions that can be allocated to the steel product is the GHG
emissions intensity corresponding to the scope of the reduction project calculated in 4.
Calculation of GHG emission reductions.
For example, the reductions from a project associated with the organization’s Scope 1 and 2
emissions can only be allocated up to the amount corresponding to Scope 1 and 2 of the GHG
emissions intensity of steel products (in the case of EPD, the value of the items listed as
production process, etc.).
(3) Handling of steel products to which reductions are not allocatedWhen EPDs etc. are used as GHG emission intensity of steel products, the emission intensity
calculated after the application of this method includes the effect of the reduction project.
Therefore, double counting of reduction effects must be appropriately prevented.
As a way to do so, for example, steel companies could take the following actions
Make it known that EPDs of steel products without emissions reduction allocation cannot
be applied to the customer's Scope 3 emissions and that if they are applied, a correction
value should be used.

Terminate the application of the mass balance approach to the project after updating
GHG emission intensity of steel products.

Use the actual value if a process equivalent to the baseline exists.

4) Obtaining third-party certification
Internal management and allocation of GHG emission reductions should be verified andcertified by a third-party certification body.
6. Others
Organizations should notify their customers that they cannot use GHG emissions shown in EPDs whencalculating customers’ Scope 3 emissions associated with steel products, and should present theappropriate GHG emissions separately.

7© 2023 The Japan Iron & Steel Federation, All Rights Reserved.

Annex I Terms and Definitions
1)

Steel products:
A steel product sold to customers
Examples of steel products: Hot-rolled sheets, heavy plates, sections, bars, wire rods, cold-rolledsheets, hot dipped galvanized sheets, electro-galvanized sheets, welded pipes and tubes, forgedpipes, seamless pipes, stainless steel, titanium, transportation equipment (rails, wheels, etc.)

2)

Organization:
A boundary of an activity is defined as a single company. Decisions about manufacturing activities
are made in a consistent manner within an organization. An organization can have more than one
steel mill and two or more steel mills can manufacture a steel product with the samespecifications. An organization does not include affiliated companies or other companies within
the same group. However, two different companies operating on the same premises under thesame governance can be regarded as one organization.
In addition, when two or more steel mills are producing an identical steel product, the steel
product can be defined by using a weighted average based on the production volume of each mill.

3)

Internal credits:
Certifications of GHG emission reductions verified by a third-party certification body for internalmanagement purposes. The certificates will be used only for internal management of GHG emissions
reductions and will not be sold as internal credits alone.
In contrast, "external credits" refer to certificates of emissions reductions outside the organization,
which are not used in this mass balance approach.

4)

Mass balance approach:A method of assigning specified characteristics of input materials to outputs/products when mixing
raw materials with different characteristics, in general.
The steel industry utilizes the mass balance approach in the form of pooling GHG or CO2 emission
reductions from reduction projects within the organization and allocating the reductions to any
product to be supplied along with certificates.

5)

EPD (Environment Product Declaration):
A "Type III Environmental Label" in accordance with ISO 14025, an environmental program thatprovides quantitative disclosure of the environmental impact of a product or service throughout its
life cycle, from procurement of raw materials to disposal and recycling.

6)

GHG (Green House Gas):
Gases that absorb infrared radiation and emit it back to the earth's surface, thereby warming theatmosphere near the earth's surface.
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Note: GHGs include carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons(HFCs), perfluorocarbons (PFCs) and sulfur hexafluoride (SF6).
7)

Scope 1, 2, and 3 (GHG protocol):Scope 1 refers to the direct emissions from an organization's owned operations. Scope 2 refers toindirect emissions from purchased electricity, steam, heating, and cooling. Scope 3 refers to allother indirect emissions generated throughout an organization’s value chain. See the GHG Protocolfor more details.

8)

Boundary:
Activity limits used to calculate the GHG emission intensity of steel products, GHG emission
reductions, and assign emission reductions to any steel products.

Revision History
VersionDate of issue

Version 1.0

September 29, 2022

Version 2.0

October 26, 2023

9© 2023 The Japan Iron & Steel Federation, All Rights Reserved.