Posts Tagged ‘Joint Implementation’

Russian steelmakers could earn another 13.7m carbon credits

Russia is expected to become a significant new source of offset credits in the coming years. After several years of delays it began approving projects to earn ERUs last year.

SBB 21 January Four Russian steel producers are among the 18 projects recently approved by the Russian Ministry for Economic Development to earn carbon credits from the Joint Implementation (JI) programme, Steel Business Briefing learns.

Once approved, the projects are now eligible to receive Emissions Reduction Units (ERUs) which can be sold or traded on an exchange. For a reduction in greenhouse gas emissions equivalent to one tonne of carbon dioxide the project would receive one ERU with a current market value of €11.1/t ($14.93/t) on London’s European Climate Exchange. ERUs can be bought by European industrial facilities and used to meet their obligations under the Emissions trading System.

The four steel projects are all in the five biggest projects on the list and together could earn up to 13.7m ERUs. By far the largest was MMK’s 2004-2006 project to replace its open hearth furnaces with EAFs, which the company expects to save 7m t of CO2 emissions and therefore earn 7m ERUs.

NLMK, TMK and Asha Iron & Steel have also had projects approved and could earn 2-2.5m credits each.

This is the second group of Russian JI projects to be approved so far. JI is a mechanism under the UN Framework Convention on Climate Change by which investors in Annex I countries, including Russia and Ukraine, can earn carbon credits by investing in reducing greenhouse gas emissions.

Amurmetal, Chelpipe Kosaya-Gora Steelworks and Air Liquide-Severstal had also entered projects, but these did not receive approval this time around.

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Russian steel projects ask for over $377m of carbon credits

After several years of delays, the Russian government finally began the process of issuing carbon credits to Joint Implementation projects this year. Now, Russian steel plants which have reduced their emissions canearn credits, while European steelmakers have access to a new source of offset credits for the emissions trading system.

SBB 3 November 2010 Eight Russian projects which have reduced greenhouse gas emissions in the iron and steel industry are among a total of 58 projects which have taken part in the second round of applications for carbon credits from Russia’s Sberbank, Steel Business Briefing learns.

Sberbank is offering a total of 30m Emissions Reduction Units (ERUs), worth more than $553m (€394m) according to a recent European auction, to projects which have successfully reduced emissions as part of the UN Joint Implementation programme. The state-owned bank should decide on which projects receive ERUs in this round by 22 November, SBB understands.

The largest project on the list is Magnitogorsk Iron & Steel’s (MMK) switch from open-hearth furnaces to electric arc furnaces and installation of continuous slab casters. It is asking for 7m credits to represent the 7m tonnes of CO2 equivalent emissions it has saved since the start of 2008.

In addition to six projects to upgrade or improve the efficiency of iron and steel production and rolling, Air Liquide-Severstal, which provides oxygen to Severstal’s basic oxygen furnaces, also applied. In total the eight projects asked for more than 20m ERUs.

In the first round of applications Evraz was granted the right to 2.12m ERUs, while Metalloinvest was granted 3.2m. They should receive the credits by the end of the year, SBB understands.

ERU futures and options contracts will begin trading on the London-based European Climate Exchange (ECX) on 8 November, SBB notes.

Ukrainian met coal miner starts selling Kyoto credits

For now, Ukraine seems to be running ahead of Russia in the JI metcoal, iron and steel sectors. But plenty of scope for Russia to catch up.

SBB 6 August 2010 Ukrainian coking coal producer, Krasnodonugol, part of the Metinvest group, has sold its first batch of Emission Reduction Units (ERUs) for €598,000 ($788,000). The buyer was Dutch bank, ING, Steel Business Briefing understands.

ERUs are granted under the Kyoto protocol to projects which reduce greenhouse gas emissions. One ERU is granted for a reduction equivalent to one tonne of carbon dioxide.

Krasnodonugol has reduced methane emissions from its Sukhodilska-Skhidna mine, one of seven it operates in the Luhansk region, by using it as a fuel for the boilers which are used to heat the mine and provide hot water. In total the project hopes to reduce emissions by 308,132t CO2-equivalent over 2008-2012.

The first batch of credits was received once emissions reductions for the period 2006-2008 were confirmed. The project still qualifies for further allocations for emissions reductions during 2009-2012.

Krasnodonugol is also undertaking a similar project at its Sukhodolska-Vostochnaya coal mine. It expects this to be operational by Q4 this year. Though this project has yet to be approved for under the Joint Implementation programme, the company hopes to achieve emissions reductions of some 200,000-250,000 tonnes CO2-equivalent from this project.

Ukraine is also host to a number of Joint Implementation projects related to the steel industry. These include three projects at Industrial Union of Donbass’s Alchevsk steel plant which have combined potential emission reductions of over 4.5m t CO2-equivalent, SBB notes.

MMK bids for Russian carbon credits

Russia’s first tender for ERUs – but it is unclear why MMK is involved. There have been significant delays in organising the tender, but it had been expected in recent weeks.

SBB 18 March Russia’s MMK is bidding for carbon credits in the country’s first tender of this type. However it was unwilling to reveal to Steel Business Briefing the details of its emission-reduction project. One source suggests the bid could be associated with mine expansion.

The tender is being organised following Russia’s accession to the Kyoto Protocol several years ago. Moscow-based Sergei Sitnikov of Baker and McKenzie, a law firm explains that, to date, Russia has no clear procedures for the issue of Emission Reduction Units (ERUs). They are linked to JI or Joint Implementation projects under the Protocol.

He adds that Sberbank, a majority state-owned bank is collecting bids and reviewing the projects. “The bank and an expert council to be formed by the bank will make recommendations to the Ministry of Economic Development (MED), which will then approve or reject bids,” Sitnikov tells SBB.

Each tender has a limit of ERUs of 30m tonnes. Bids will be judged on grounds of ecological and energy efficiency, their technical and financial potential and economic and social impact.

MMK spokesperson Evgeny Kovtunov explains that if companies in the scheme reach specific carbon reduction targets in their carbon reduction projects, they can then sell on the ERU’s to other companies outside Russia. “The penalty for excess emissions could be €100/tonne, while current quotes for carbon trades stand at €10/t,” Kovtunov speculates.

It also tells SBB that it expects a decision on whether it has been successful in 30 days.

Russian mills fear carbon-based border controls on steel

Several of the presentations at the recent 15th CIS Metals Summit, organised by Adam Smith Conferences in Moscow focussed on carbon issues. The vice president of the Russian Union of Metal Exporters, Leonid Shevelev, looked at methods of measuring carbon dioxide emissions and detailed proposals for reducing from Russia’s steel mills. He focussed on several companies including Severstal.

Another paper – from Sergei Sitnikov, from Baker & McKenzie, analysed the recent changes in Russian legislation on Joint Implementation of carbon reducing projects. JI is part of the Kyoto Protocol. 

Other speakers looked at sustainability in financing, including the Equator Principles.

Roger Manser