Posts Tagged ‘Emission Trading System’

European carbon prices jump on nuclear crisis

SBB 18 March European Union Allowance (EUA) prices have jumped €1.37/t in a week following uncertainties over Europe’s nuclear power capacities. Germany’s decision to shut down some nuclear plants and suspend extending their lifetimes has fuelled the increase, analysts tell Steel Business Briefing.

December 2011 EUA futures settled at €17.25/t on 16 March on the London-based European Climate Exchange (ECX). Higher EUA prices could mean higher costs for the steel industry from 2013 onwards, when it will have to purchase an increasing quantity of carbon credits.

Germany’s seven oldest nuclear power plants, that generate around 25% of its nuclear capacity, have been closed for at least three months for safety checks as a result of the nuclear crisis in Japan. This will lead to an increased use of fossil fuel power plants and a double effect of higher power prices and higher carbon dioxide emissions, explains Mauricio Bermudez Neubauer, director of carbon markets, trading and risk management at Accenture.

Once safety checks are completed, the nuclear power plants are likely to restart and power prices may then consolidate. However, the extra emissions released during the shut-down could have a more permanent effect on EUA prices, Neubauer adds. Also, if Germany decides against extending the lifetime of its nuclear plants, this would significantly increase EUA demand in the medium to long term.

Germany switches sides to approve CO2 benchmarks

The proposed benchmarks for industrial greenhouse gas emissions are no expected to be confirmed by the European parliament later this year. Eurofer still believes that they have been set too low and estimate that the European steel industry could face additional costs of some €1.5-3bn per year. According to SBB‘s broad estimates this could add some 2.5-5% to average European integrated steelmaking costs. However, the most efficient plant in Europe is more likely to see an increase of under 0.5%.

SBB 20 December 2010 The greenhouse gas (GHG) benchmarks for the European steel sector were approved last week after the German environment ministry abandoned its opposition, Steel Business Briefing understands.

The German environment ministry had opposed the benchmarks, presumably as they were too low, and had the power of veto. However, it changed its position to vote in favour at the last minute. The ministry simply “didn’t feel much support” for its view from other governments and decided to compromise, it tells SBB. It described the final decision as well balanced.

The benchmarks will be used to determine the volume of free emission allowances given to the steel industry in phase III (2013-2020) of the European Emissions Trading System (ETS). Polluters which have insufficient allocations to cover their emissions will have to buy in more permits.

Indeed, the agreed benchmarks are still ‘far below where they need to be’, Eurofer’s Axel Eggert tells SBB. They supposedly represent the average of the 10% most efficient plants in terms of GHG emissions, but the benchmark for blast furnaces is still some 7% below the most efficient in Europe, Eurofer suggests.

The result will lead to significant added costs for steel companies in Europe “compared to steel companies that produce steel in regions which do not have similar CO2 costs’, warns ArcelorMittal in a statement sent to SBB.

European carbon prices: ‘underlying trend is up’

High carbon prices work two ways for the steel industry. On the one hand, they encourage more efficient and new ways of production for the integrated producers. On the other hand, if mills need more EUAs, they become more expensive to buy. Hence the benefits of CERs, particularly from within one’s own group.

SBB 3 September 2010: European Union Allowances (EUAs) closed at €15.2/tonne on 31 August on the London-based European Climate Exchange (ECX). This was almost level from last week’s €15.3/t but up over €1/t from the end of July.

Recent price rises came largely from speculators as utility companies are still out of the market, Matteo Mazzoni of Italian economic institute Nomisma Energia tells Steel Business Briefing. Nothing is expected to affect the market significantly before the end of September, he adds.

However, Emmanuel Fages of carbon market analysts Orbeo tells SBB the underlying trend is up. Though prices have levelled off in the last week, prices are still higher than a month ago and could continue to rise. EUAs could touch €17/t before the end of Q3, he suggests.

EUAs can be used to account for greenhouse gas emissions equivalent to one tonne of carbon dioxide under the European Emissions Trading System (ETS). By the end of phase II (2008-2012) of the ETS, a number of new facilities will have joined the scheme. European states have set aside EUAs in a New Entrants Reserve (NER) to cover the emissions of these plants.

A new report by Orbeo suggests that European states will have a net surplus of 88m EUAs which will end up on the European markets. However, this is less than many analysts expected, Fages tells SBB. If the number of new entrants increases significantly as a result of the recovering economy, a net deficit of 61m EUAs could be seen.

Spanish mills criticise slow CO2 action in USA

Spanish steel producers here criticise the US for taking only feeble action to reduce CO2 emissions from its steel operations, whilst the EU Commission has been significantly more active. There is some validity in the Spanish criticism: the USA, as well as many other countries, are very slow in taking action. The US government should be encouraging the EPA to move ahead.

SBB 7 July 2010 The Spanish steelmakers’ association Unesid is to ask the EU to suspend the adoption of new environmental rules affecting the industry,Steel Business Briefing learns from the association’s annual meeting in Madrid.

Costs are perhaps the most important factor in determining the success of players in the international steel market, and Unesid warns that the competitiveness of European producers could be undermined by any unilateral decisions, as European players compete with third country steel companies who do not have to meet similar regulations.

Spanish steelmakers are concerned, in particular, about the increasing number of regulations and plans for an emission trading system, which are considered “an important burden” for producers.

“Environmental issues are an important part of Unesid’s activities, but we face too many regulations which our international competitors do not have to meet,” Gonzalo Urquijo, president of Unesid, told the meeting.

According to Urquijo, the EU has committed to reduce its polluting emissions by 20% by 2020, while other commercial competitors, like the US, have only expressed an “intention” to limit such emissions by less than 5%.

Eurofer: EU carbon directive must be implemented fairly

How much will the volume of EUAs be down in 2013? How proactive will the European Commission be? Will it veer towards a 30% cut?

SBB 2 July 2010 European steel producers association, Eurofer, has reiterated to Steel Business Briefing its concerns over the supply of European Union Allocations (EUAs) in phase III (2012-2020) of the European Emissions Trading System (ETS).

The European Commission missed a deadline on 30 June to publish the total number of EUAs to be made available in phase III. When questioned, EC spokesman, Lena de Visscher, told SBB the announcement would now be made “in the next few days”.

“The volume of EUAs available in 2013 will be much below the average of the second trading period [2008-2012],” warns Eurofer spokesman, Axel Eggert. According to the EC directive the total number of EUAs will decrease at a constant rate from 2013 but, because the decrease is to be measured from the ‘mid-point’ of phase II, a sharper decline will be seen in 2013.

Although the general model for phase III allocations has been set out, details are thin on the ground. The system could be either too lenient to be effective in cutting emissions, or so strict that it becomes punitive for steel producers. “The provisions of the directive must therefore be implemented in a way that a fair quantity is available and not reduced to the lowest possible level”, Eggert adds.

The method of auctioning EUAs in phase III will be voted on by the EU climate change committee on 14 July, SBB notes.

EU carbon directive must be implemented fairly, say steel mills

Steel producers talk about “fair” implementation – it has to be presumed that this is fair from their point of view. All well and good, but there is also the need to look at fairness from a wider point of view. What this should be, of course, is totally opaque.

SBB 2 July 2010 European steel producers association, Eurofer, has reiterated to Steel Business Briefing its concerns over the supply of European Union Allocations (EUAs) in phase III (2012-2020) of the European Emissions Trading System (ETS).

The European Commission missed a deadline on 30 June to publish the total number of EUAs to be made available in phase III. When questioned, EC spokesman, Lena de Visscher, told SBB the announcement would now be made “in the next few days”.

“The volume of EUAs available in 2013 will be much below the average of the second trading period [2008-2012],” warns Eurofer spokesman, Axel Eggert. According to the EC directive the total number of EUAs will decrease at a constant rate from 2013 but, because the decrease is to be measured from the ‘mid-point’ of phase II, a sharper decline will be seen in 2013.

Although the general model for phase III allocations has been set out, details are thin on the ground. The system could be either too lenient to be effective in cutting emissions, or so strict that it becomes punitive for steel producers. “The provisions of the directive must therefore be implemented in a way that a fair quantity is available and not reduced to the lowest possible level”, Eggert adds.

The method of auctioning EUAs in phase III will be voted on by the EU climate change committee on 14 July, SBB notes.

Steel companies say carbon credit ‘surplus’ claims unfair

This report from Carbon Market Data seems to ignore last year’s recession as well as the waste gas recycling issue. Steel production fell massively, and is now picking up again.

SBB 11 June 2010 Figures suggesting European steelmakers have received surplus carbon credits are unrepresentative, Eurofer tells Steel Business Briefing. ArcelorMittal, Corus and ThyssenKrupp received the most unused carbon credits under the Emissions Trading System (ETS) in 2009 according to a Carbon Market Data report.

In phase II (2008-2012) of the ETS, steel companies receive free EUAs. Plummeting steel production in 2009 meant that allowances were more than sufficient to account for carbon dioxide emissions.

ArcelorMittal received 43 million European Union Allowances (EUAs) in 2009, which it did not redeem. At a price of €15.6 ($18.8) per credit (see related article) these have a market value of around €670.4m. Corus received 13m unused EUAs while ThyssenKrupp received 11m.

However, a ‘huge part’ of the unused credits are due to the recycling of waste gases, Eurofer spokesman, Axel Eggert, tells SBB. Some steel mills capture waste gases for use in power generation and some steel plants give EUAs to associated power plants to cover emissions generated by the process. These EUAs appear as unused in the report, although they are no longer held by the steel plants. One major steel producer says up to half of his ‘surplus’ EUAs in 2009 were actually held by power plants.

The producer also said it ‘made no sense to tax best-practice’, arguing that Europe’s steelmakers are among the greenest. ArcelorMittal has plans to cut CO2 emissions per tonne of steel by 8% by 2020, while Corus says it will emit less than 1.7 tonnes of CO2 per tonne of steel by 2012, SBB notes.