The Japan Iron and Steel Federation
Tokyo, 29th November 2011

European Climate Change Policy and its
implications for the steel industry

Gordon Moffat, Directeur GeneralEUROFER

Policy background
EU Emissions Trading System post - 2012
Main featuresCap →cut in emission for ETS sectors of 21% by 2020
(compared to 1990)

Auctioning of allowances
100% auctioning for the power sector from 2013
Measures to protect the competitiveness of energy-intensive industries

100% free allocation at the level of benchmarks for sectors
exposed to leakage
Compensation for electricity price rises (as a result of auctioning)

2European ETS – Main problems for industry:

1. European Measures are unilateral and disproportionate compared to the restof the world
2. The cap disproportionately affects industry
3. The implementation of measures designed to give industry 100% freeallowances, but in fact won’t!
EU legislation to reach -20% target by 2020
1. ETS Directive with a 21% reduction in GHG emissions by 2020 compared to 2005
levels:= In reality a total reduction of 35% compared to 1990 due to early action
by ETS sectors which reduced emissions by 15% 1990-2005
2. Efforts Sharing Directive proposing a 10% reduction in GHG emissions by
2020 compared to 2005 for emissions not covered by the EU ETS (buildings,transport, agriculture, waste, small emitters, etc.)= In reality a reduction of only 6% compared to 1990 since emissions forthese sectors increased 1990-2005
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ETS: Results of Implementation contrary to the political understanding
made with the member states
Benchmarks
The adopted benchmark values differ substantially from those proposed by
EUROFER due to the refusal of the Commission to assign all the carbon inrecovered waste gases to the steel producer benchmark (the proportion used forpower generation has been excluded).
Result: → Even the best performers will be short 8,5%
→ The sector as a whole will be short over 23%
Total cost to industry €11bln
Cross-Sectoral adjustment Factor
Could reduce the benchmarks by a further 2-3%.
Cost = €1bln

Electricity Compensation:
Electricity prices estimated to increase by 30% 2013-2020.
Compensation will be limited, covering only marginal increases.
4EU steel industry has already achieved a lot: nearing technical limits
Important CO2 reductions and increased energy efficiency over the last 30 years inEurope (1970-95 c.-50%)
Energy use and CO2 emission per ton offinished product - Index 100 - 1975

21% reduction over 1990-2005

100Energy90

80

70- 21%6050

401975

1980

1985

1990

1995

2000

2,005

Reduction since 1975:• 1/3 for improvement ofprocesses and change of raw
materials• 1/3 for material efficiency at all
steps (Continuous casting)• 1/3 for the increase of scrap
recycling in EAF based
production

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Approaching of theorical limits of the BF process
Increased Blast Furnace performance in EU 15

Development of recycling in EU 27:
Scrap usage increases 1.7% per year

Reducing agent- 55 %Development of continuous casting

Improvement of material efficiency in 9 EU Countries
Is reaching its limits

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The Commission Low Carbon Roadmap 2050
In October 2009, the Council endorsed a long-term target of reducing
collective greenhouse gas emissions by 80-95% by 2050 compared to1990 levels
Main EUROFER objections to the roadmap are:

• Very questionable economic modelling• The targets are not technology-led. Only CCS is explicitly mentioned,
the Commission assumes other technologies will “appear” as necessary.
• The targets are unilateral.
• Confiscation of free allowances (600-800 Mio).
• No account of the situation of individual industries and no provision
for economic growth.
• ETS sectors would have to reduce by 29% in 2020, by 45% in 2030,
by 65% in 2040 and 87% in 2050.

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Innovative use of steel saves six times as much CO2 as is causedby the production of the steel* - Case study Germany
Net CO2 reduction
potential

Case studies
Germany
1 Efficient fossil fuel PPs

29.5

2 Wind power plants
Energyindustry

Emissions in thesteel production3

14.2

3 Other renewables2

5.0

4 Efficient transformers

2.1

5 Efficient e-motors

1.9~ 400 : 10.4

32 : 10.03~ 200 : 10.1

14 : 1

1.05101.3 : 10.9

1.1 : 1

1.0

9:1

9.2
0

3:1
8.4

11.2

TrafficHH, ind.,
CTS1

<0.1

0.7

6 Weight reduction cars
7 Weight reduction
trucks8
Combined heat/power

Ratio between CO2
reduction/emission4

30

01

1011MtMt∑~ 74 Mt

9∑~ 12 Mt

6:1

1. HH = households; CTS = commerce, trade, and service 2. Geothermal, biomass, hydro 3. CO 2 expenditure for other materials not examined; values
are rounded 4. Ratio relates exclusively to the emissions of steel production; values are rounded
Source: BCG analysis* Source: BCG report – Steel’s CO2 Balance. The Steel Industry’s Contribution to Climate Protection (2010)

8ULCOS 7 groups ofpotential solutions
New Production Routes: potentially from 2020-2050• Hydrogen based Steel Making

Top gas recycling in blast furnace
Modification of blast furnace withgas recycling, CO2 removal &injection of oxygen• Use of Biomass• Iron Ore Electrolysis
Existing Process Evolution: potentially from 2020

• New Blast Furnace with top gas recycling• Improved Direct Reduction• Smelting Reduction
Other Solutions• Capture and Storage of CO2
Prerequisites for these solutions• Possibility of CO2 sequestration,
Abundant biomass, Cheap and carbon
free electricity and hydrogen9Climate Policy : A more realistic approach for industry• Policy should be based on a life cycle analysis approach rather than asimple measurement of production emissions• Address manufacturing efficiency via industry agreements, not limiting
emissions by limiting output• Put more effort into construction and transport emissions reductions
through efficiency measures, at the moment manufacturing industry
and power are bearing 90% of the emission reduction effort. The whole
economy should be sharing the load of the emissions reduction effort,
not just industry• Massive support for research and development for new technologies.
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