Posts Tagged ‘Environment’

CSA major source of CO2 emissions in Rio de Janeiro

SBB 14 November Companhia Siderúrgica do Atlântico (CSA) – the new Brazilian slab plant owned by ThyssenKrupp and Vale – is being blamed for a large rise in carbon emissions in Rio de Janeiro, Steel Business Briefing learns from local environmental authorities.

From June 2010 to June 2011, city chiefs estimate 5.7m tonnes of CO2 were released into the atmosphere by CSA’s activities, half the city’s total 11.35m t of CO2 emissions in 2005.

Rio de Janeiro aims to reduce CO2 emissions 8% (from 2005’s CO2 total) by 2012 and the policy on climate change and sustainable development requires emissions to be cut 16% in 2016 and 20% by 2020.

Authorities have yet to decide whether to penalize CSA or if the company can receive its definitive operating license. To date, the mill has functioned with a pre-operation license that expires in September 2012, SBB notes.

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Severstal to cut emissions making energy from waste methane

In addition to direct emissions from steelmaking, emissions from the extraction of raw materials also contribute to steel’s total carbon footprint. However, this also gives vertically integrated steelmakers the opportunity to invest in energy efficiency across the supply chain. One option is to produce power from mining waste gases, insuating the mining operation from volatile energy prices and reducing overall greenhouse gas emissions.

SBB 28 Sept Vorkutaugol, the coking coal mining division of Russian steelmaker Severstal, will start recycling methane gas collected from its Severnaya mine, processing it into heat and electricity at the 800m rouble ($25m) worth gas generating power plant it is preparing to commissioning in the first quarter of 2012, Steel Business Briefing learns from Vorkutaugol.

The 18 megawatt plant will cover 100% and 70% of electricity and heat energy needs at Severnaya. When fully operational, it will enable Vorkutaugol to reduce its emissions by 0.5m t/y in carbon dioxide equivalent, as well as to save up to 300m roubles/year, which may be diverted onto operational needs and other investments, SBB understands.

Based in Russia’s northwestern Komi republic, Vorkutaugol operates four mines: Severnaya, Vorkutinskaya, Zapolyarnaya and Komsomolskaya, and open pit Yunyaginsky. Their combined output is expected to amount to 8.5mt this year, as SBB previously reported.

UK steelmakers face jump in energy costs

The way in which governments choose to price carbon is a sensitive issue. A global price would ensure that there is no damage to the competitiveness of any aprticular region. However, this can only happen through an international climate change treaty. In the mean time differing carbon pricing regimes will lead to differing costs. The UK’s decision to set a minimum price for carbon credits is likely to lead to higher costs for UK steelmakers relative to their European counterparts. Some of this extra cost is likely to be compensated.

SBB 3 August UK wholesale gas prices which influence power prices have risen strongly in recent months and, to a lesser extent, electricity costs also, Jeremy Nicholson, director of the Energy Intensive Users Group tells Steel Business Briefing. This is especially visible for those currently renewing annual contracts. “Although the wholesale gas price is quite competitive compared to continental Europe, it is at a premium to the US, which has a current oversupply,” he adds.

He continues: “From 2013, the carbon floor price will be introduced by the UK government in order to increase competition for renewable; anyone taking out two-year contracts now will see these increases priced in”. Compared to a year ago power costs have increased by 10-20%, depending on when deals were made, he adds.

He continues: “The current trading price of carbon is around €13-14/tonne of CO2 emitted; the carbon floor price will be around £16/t and in addition to raising the costs for coal/gas power generators and therefore steelmakers, this will not be able to be passed on as it is a UK-only tax, leaving a discrepancy with European counterparts, such as Germany which has an exemption”.

Previous government estimates say carbon factors have already added some 20% to costs compared to year ago. However a new analysis says these could reach 31-51% by 2020, which per year is a more optimistic estimate, Nicholson says. He adds, however, that this analysis could be an underestimate.

The current wholesale electricity price for industrial users is just over £50/MWh, with delivery and supply added it is around £70-75/MWh.

Eurofer sues the European Commission over BF benchmark

In July the European steel producers’ association, Eurofer, submitted its long-awaited legal suit against the Emissions Trading System (ETS). But whether or not its complaints carry legal weight, the suit is unlikely to be resolved for another two years. By that time steelmakers will already be facing the costs of phase III of the ETS. The only certain way to manage the costs of carbon trading therefore remains investment in energy efficiency and emissions reduction technologies. While the benchmark may be technically impossible to achieve while maintaining production levels, the difference in costs faced by the most and the least efficient European plants could have a significant impact on competitiveness.

SBB 22 July The European steel producers’ association, Eurofer, has filed a legal challenge to the European Commission’s carbon dioxide emissions benchmark for hot metal production. Eurofer claims that the EU’s wrongly-determined benchmark could cost the industry an additional €600m ($862m)/year from 2013 to 2020.

The benchmark – in C02 t/tonne hot metal – decides the number of free carbon credits each integrated steelmaker receives from 2013. It is meant to represent the average of the 10% most efficient plants.

However, the commission’s benchmark is technically unachievable, comments Eurofer director general, Gordon Moffat. “Nowhere in the world is there a steelworks that could operate its plant at the level of this benchmark,” he tells Steel Business Briefing.

At issue is the use of blast furnace off-gases to produce electricity. Eurofer wants all the steelmakers’ CO2 to be included in the benchmark.

In contrast, the commission argues that steelmakers should not be given free credits for electricity generation. It has calculated the amount of carbon dioxide that would be released if natural gas, rather than BF gases are used to generate power, and reduced the benchmark by that amount. Eurofer notes that the EU’s emissions trading directive allows free allocations to be given to electricity production from waste gases.

“The benchmark rules have been approved by EU member states and the European Parliament after a thorough consultation analysis. We are confident that court will side with us,” DG Climate Action spokesman, Isaac Valero-Ladron tells SBB.

Poland is also separately suing the commission over the benchmarks. Unless the European Court of Justice decides on fast tracking, the case could take two and a half years, Eurofer notes.

Tata could link into UK carbon capture and storage network

The steel industry will need to find a wide range of option to reduce emissions in the coming years if it is to avoid punitive costs. However, it does not always have to do so alone. Sometimes collaborating with existing projects may be a viable alternative to implementing an entirelyseparate scheme from scratch. One potential area for collaboration, if it is proved succesful, is in carbon capture and storage.

SBB 15 July Tata Steel Scunthorpe is in discussions to connect to a carbon capture and storage project in northern England, it confirms to Steel Business Briefing. Pending funding, this could significantly reduce the plant’s carbon dioxide emissions and the resulting costs.

The UK’s National Grid has begun consultations on a £5bn pipeline project to transport CO2 from the Don Valley power plant project to a storage site in the North Sea. The pipeline is planned for completion in 2015.

It is now also talking to other power plants and industrial sites in the Yorkshire & Humber region, including Tata Steel Scunthorpe, which together account for some 60m t/y of CO2 emissions.

The goal would be to develop a pipeline network in order that other facilities could feed their emissions into the main pipeline, the National Grid tells SBB. However, each facility would have to first receive funding, most likely from the European NER300 funding programme (New Entrants’ Reserve of 300m credits), it adds.

Tata Steel is looking at how carbon capture and storage and how this could benefit plants such as Scunthorpe, it tells SBB. It could now apply for the second round of NER300 funding, although no decisions have yet been taken, it points out. Applications may open next year once first round applications are decided, Jan Lucas, managing director of PNO Consultants Germany, tells SBB.

However, the exact amount of funding available is uncertain as the fund consists of the 300m carbon credits rather than a cash amount, warns Lucas. These have to be sold before the exact cash value of the fund is known.

EC could manipulate carbon prices

The cap-and-trade system of pricing greenhouse gas emissions is intended to provide the financial incentives that could come from a system of taxes in a more efficient way by using a market mechanism to determine prices. However, this contains a contradiction that has not been fully resolved. When the market sets a price that no longer adequately incentivises investment in reducing emissions, should policy makers stick to their free-market principles or act to ensure that industry will face costs if it does not invest in green technology?

At the end of June the European Commission stated for the first time that it might restrict the supply of carbon credits to support prices. This would, in effect, place the commission in a position similar to a central bank, controlling the supply of credit to maintain the value of its currency. While DG Climate Action views this as a legitimate means to ensure its emissions reduction targets are achieved, many energy intensive industries complain that this violates the market principles of the cap-and-trade scheme.

SBB 27 June The European Commission (EC) has said for the first time that it may increase carbon credit prices by setting aside credits from the Emissions Trading System (ETS). Maintaining high prices is necessary to avoid any one sector from getting a “free-ride,” DG Climate Action spokesperson, Isaac Valero-Ladron tells Steel Business briefing.

The EC energy directorate’s energy efficiency programme could reduce demand for European Union Allowances (EUAs) from power companies. If this causes EUAs to fall, sectors which have not reduced their emissions will face lower costs and have less motivation to reduce their own emissions, Valero-Ladron points out.

However, artificially increasing the price is not in line with the directive which covers the ETS, Eurofer complains. This was intended to create a system which reduced greenhouse gas emissions at the lowest possible cost. As long as the shrinking cap on emissions in the ETS is met, the price should remain low, it argues.

The energy efficiency programme has been seen as a shift in focus away from the ETS. The December 2011 EUA contract fell more than 9% on 23 June to €13.37/t ($19/t) after the programme was launched.

But the EC will ensure that the ETS continues to function, says Carine Hemery of French carbon and energy analysts, Orbeo. This is likely to mean setting aside EUAs to reduce supply. But this could add an element of political risk to the carbon markets. If traders are put off by this, the liquidity of the market could suffer, she warns.

Spanish steel industry fears surge in electricity costs

The final cost of carbon pricing mechanisms varies across industries. While the energy industry can easily pass on the added cost of emissions to their customers, other industries, such as steel, find it harder. Some fear this could lead to a squeeze on margins in industries which face international competition. EAF steelmakers in particular are looking to the European Commission to propose rules for compensation by the end of the year.

SBB 27 May The Spanish steel industry is concerned about electricity costs rising further from the second half of 2013, Steel Business Briefing learns from Andres Barceló, general director of the country’s steelmakers’ association Unesid.

In 2013 electricity and utility companies will start targeting price increases following the start-up of phase three of the Emission Trading System (ETS) in the EU. These companies won’t be allocated any free carbon dioxide allowances and will try to pass on these higher costs to their clients, Barceló told SBB’s recent Steel Markets Europe conference in Barcelona.

“Spain will be particularly hit, being partly isolated from the European network. All over Europe prices will rise. Only France, having a strong nuclear production, may be hit to a lesser extent,” he explains.

The Spanish industry, with 70-75% of crude steel produced in electric arc furnaces, has been highly concerned about energy costs for some time. Local mills frequently check electricity prices and, in some cases, stop production when they get too high, he says. Around €30-50 are spent in Spain for producing 1 tonne of crude steel, SBB calculates.

“In Spain we are still repaying the costs of the renewable energy investments made in the past,” Barceló adds.

Eurofer and national steel associations are trying to pressure authorities to avoid such increases, but they are expected to be implemented, SBB notes.