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.
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.
Unlike Europe’s ETS India’s Perform, Achieve and Trade scheme will set targets for individual plants, not across sectors. It is therefore very difficult to predict the impact that it will have. Targets could be too easily-achieved to have a significant effect on energy-saving investments. So far even those directly involved in the scheme have been unwilling to make firm predictions. However, with the mechanism in place the impact of the scheme could be increased. New targets are due to be set every three years.
SBB 1 April India launches an energy-efficiency cap and trade scheme today, which could affect around 100 steel and sponge iron producers across the country, Steel Business Briefing learns. The scheme hopes to achieve fuel savings equivalent to 23 million tonnes of oil and reduce CO2 emissions by as much as 98m t by April 2014.
The eventual impact of the scheme on the steel industry is unpredictable, as targets are yet to be set. No analyst was able to give SBB an assesment of this at such an early stage; steel and carbon trading companies had not responded to SBB’s queries by the press deadline.
Each individual plant, known as a Designated Consumer (DC), will have its energy use evaluated and set by an individual energy efficiency target, to be met by 31 March 2014. Plants that exceed their target will be granted Energy Savings Certificates (ESCerts). Those which fail to achieve their targets must either buy ESCerts or face a fine.
From 1 April 2014 the second phase will begin, SBB understands. At this point ESCerts will be traded on exchanges in the same way that carbon credits are traded under Europe’s Emissions Trading System. New targets will also be set, which must be met by 31 March 2017.
In addition to the iron and steel industry, the aluminium, cement, thermal power, pulp and paper, textile, fertiliser and chlor alkali industries will also be affected, SBB understands.
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.