Posts Tagged ‘Clean Development Mechanism’

European mills see differing profits from carbon credit sales

In the current period of the European Emissions Trading System, steelmakers have been left with a surplus of carbon credits. This surplus may be reversed as restrictions on emissions become more stringent from next year onwards but for now these credits are a tempting way to bolster ailing balance sheets. However, the key to getting the most out of these credits is a proper strategy and some steelmakers are achieving almost double the return per credit as others, as this story from Platts Steel Business Briefing’s Daily Briefing shows.

SBB 19 March – SSAB sells surplus carbon credits as emissions fall

Sweden-based steel producer SSAB saw greenhouse gas emissions at its European plants decline in line with production last year to 5.5m tonnes of carbon dioxide. The company also took the opportunity to bolster its balance sheet by selling 4.1m surplus carbon credits.

SSAB earned SEK 275m ($40.47m) from the sale of carbon credits last year. This would suggest it earned just $9.87 for each of the credits.

The company sold most of the credits towards the end of the year when SSAB’s blast furnaces were running at low utilisation levels, a SSAB spokesperson says. Carbon credit prices fell sharply in Q4, Platts SBB notes.

ArcelorMittal earned an average of $18.6 per credit last year, indicating a more sustained sale of credits through the year, analysts suggest.

As part of the European Emissions Trading System (ETS), steelworks must report their greenhouse gas emissions and hand over one carbon credit for each tonne of carbon dioxide equivalent emitted. In the current trading period (2008-2012) steelmakers have been given sufficient carbon credits to cover their emissions. In fact they have received more than they have so far used as the allocation was calculated before the 2008 financial crisis and so actual emissions have been lower than previously expected.

SSAB was granted 36.7m credits for 2008-2012 and now has 7.5m remaining to cover emissions this year. SSAB could therefore have more credits to sell unless it increases its European steel production by around 36%. Platts SBB calculates.

China’s steel industry tops 20m UN carbon credits

Earlier this year, China’s steel industry earned its 20 millionth carbon credit. Projects such as the Clean Development Mechanism have helped steelmakers, especially in China and India, to find financing for energy efficiancy investments. With India introducing its own energy efficiency certificate trading suystem and China looking at various ways to price carbon these kinds of scheme are likely to continue aiding investment. To hear what other factors are driving investment in the steel industry come to SBB’s third annual Green Steel Strategies conference in Berlin on 19-20 April.

Platts SBB 10 February The total number of Certified Emission Reductions (CERs) issued to the Chinese steel industry crossed the 20 million mark this week, Steel Business Briefing understands. 33.5m CERs have now been issued to steelmakers globally.

820,320 CERs were issued to China’s Jinan I&S on 8 February, taking the company’s total issued CERs to over 5.9m. The market value of CERs has fallen to around €4/t currently but Chinese steelmakers have mostly entered into contracts with a price of around €7-8/t, analysts tell SBB.

CERs are issued by the UN’s Clean Development Mechanism to projects which lower greenhouse gas emissions. One CER is given for a reduction in greenhouse gas emissions equivalent to one tonne of carbon dioxide.

Jinan I&S earned the latest batch of CERs from a plant it has built to generate power from waste gases at a blast furnace and coking oven at its plant in eastern China’s Shandong province. The plant reduces CO2 emissions by over 2m t/y.

China and India dominate CER issuance in the steel industry, accounting for over 97% of CER granted to the industry. Jinan I&S is the second biggest beneficiary after India’s JSW Group.

JSW extends lead as main steel beneficiary of carbon trading

With the first commitment period of the Kyoto Protocol coming to an nd next year, investment in some key emissions reduction schemes has been reduced. The Clean Development Mechanism can continue in name beyond Kyoto, but in practice it relies on investment by private companies interested in selling carbon credits. The market for these credits is in turn dependent on demand created by national emissions reduction targets. Companies, such as Indian steelmaker, JSW, who have been able to attract significant investment through the clean development mechanism should be eager for the next round of climate negotiations in Durban later this year to introduce a temporary extension to Kyoto.

SBB 18 July Indian steelmaker, JSW Steel, has been awarded a further 549,409 Certified Emissions Reduction Credits (CERs), bringing its total to almost 7.9m CERs, with a market value of over $110m, Steel Business Briefing learns from United Nations data. This cements the company’s lead as the steel industry’s main beneficiary of the UN’s Clean Development Mechanism (CDM).

The CDM is designed to encourage investment in reducing greenhouse gas emissions. Carbon credits are awarded to projects which reduce emissions. These can be sold to facilities which need carbon credits to meet their emissions requirements, for example under the European Emissions Trading System (ETS). This guarantees a certain level of income from the investment, allowing for cheaper financing.

JSW has earned by far the largest number of credits in the Indian steel industry: 7.9m out of a total 10.2m CERs. India and China together dominate the steel segment of the CDM, accounting for almost 96.5% of CERs awarded to the steel industry, SBB calculates.

Although JSW has earned the most CERs, it is the only non-Chinese steelmaker to earn over 1m CERs and Chinese companies have been gaining ground.

UN decision means more steel projects can register in CDM

Nearly 25 million CERs have been issued to emissions reduction projects in the steel industry so far. However, this number pales into insignificance compared with some othersectors. Some blame the bureacracy of the system and delays in issuance for holding back projects. But the industry has also been slow to utilise some of the opportunities presented to it. 

SBB 18 April The UN’s Clean Development Mechanism (CDM) could accept more steel industry greenhouse gas emission reduction projects because of a decision to revise a methodology, made at the latest meeting of the CDM’s executive board.

Changes to the methodology (ACM0012) which relates to projects that use waste gas, heat and pressure from any industrial facility (that could include coking, sintering, iron making and steelmaking) are designed to make it more broadly applicable, a UN official tells SBB.

Steelmakers can submit projects to the CDM using set methodologies and then earn Certified Emissions Reduction (CER) carbon credits. Some 23.8m CERs, with a market value of around €308.4m ($446m) have been granted to the industry to date, Steel Business Briefing estimates.

Kishor Rajhansa, programme officer at the UN Framework Convention on Climate Change (UNFCCC) introduced several CDM methodologies that could potentially be used by iron and steel plants to earn carbon credits at SBB’s recent Green Steel Strategies event.

He also invited steelmakers to submit new standardised baselines for their sector to the CDM Executive Board. These could allow the industry to claim greater benefits from the CDM. He pointed out that ArcelorMittal has recently had a methodology for its Brazilian arm approved, that will allow it to earn carbon credits by using ocean-going barges instead of trucks to transport material.

China becomes world’s largest steel beneficiary of Kyoto

The UN Clean Development Mechanism has previously been heavily criticised for the slow pace of processing of projects. However, since late 2010 it has significantly increased the rate of project registration and carbon credit issuance. Since this report was first filed its has issued a further 1,019,113 credits to Chinese steelmakers and 74,068 to Indian steelmakers.

SBB 10 January 2011 The Chinese steel industry has received the most Certified Emissions Reductions (CERs) of any national steel industry worldwide after recently overtaking India, Steel Business Briefing analysis demonstrates. Chinese steelmakers, Handan Iron & Steel, Jinan Iron & Steel, Lianyuan Iron & Steel and Ma Steel, have all received allocations of Certified Emissions Reductions (CERs) over the last three weeks.

CERs are carbon credits granted to projects that reduce greenhouse gas emissions as part of the UN’s Clean Development Mechanism (CDM). These can then be sold to companies which can use them under cap and trade schemes or traded on exchanges. The steel industry worldwide has the potential to generate up to 17,199,051 CERs per year with a current market value of some $258.1m.

Since the beginning of the CDM Chinese steelmakers have been allocated a total of 11,228,597 CERs, compared to the Indian steel industry’s 9,164,351 CERs. Although the Indian industry has 45 registered projects compared to China’s 29, the Chinese projects tend to be larger, blast furnace-based projects and so have the potential to earn more credits.

Jinan Iron & Steel remains by far the largest Chinese beneficiary with 4,326,274 CERs issued, although India’s JSW has received the most credits worldwide with 7,347,168 CERs.

The Carbon Markets & Investors Association recently commended the CDM’s Executive Board for improving the efficiency of project registration and issuance of credits over the last few months. However, it also stated that waiting times are still double what they should be.

Total Global Steel denies knowledge of 2nd-hand CER trading

The mystery of what happened to the Hungarian CERs remains unresolved. But perhaps the lesson of this story is to remember that CERs, EUAs CDMs etc are all government created entities, and as such they can in theory come and go as they please, or as the governments please. The carbon market is a state-initiated market, and not a natural market, such as iron ore or steel.

SBB 16 April Martin Lonergan, CEO of London-based steel and carbon credit trader Total Global Steel has “no knowledge” of his company having bought used Certified Emission Reductions (CERs) from the Hungarian government, he tells Steel Business Briefing.

CERs are produced under the UN’s Clean Development Mechanism and have a value of one tonne of CO2 each. Under the European Emissions Trading System (ETS) CERs can be used to account for a percentage of a company’s CO2 emissions. However, they become invalid once they have been used.

The Hungarian government sold approximately 800,000 used CERs, but then accused an unidentified company of breaking an agreement not to resell the CERs in Europe. At the same time, it asked Total Global Steel to provide trading information to help track down the invalid credits.

However, the Hungarian government stopped short of directly accusing Total Global Steel and one market analyst suggested to SBB that Hungary may simply be trying to deflect some of the bad press it has received. Lonergan previously said that he had “no idea why we’ve been identified as a trader of these credits”.