EBRD: Little future for carbon capture in the steel industry

SBB 23 April A critical lack of funding and the high cost of developing and implementing carbon capture and storage (CCS) mean it is unlikely to become widespread in the steel industry, senior advisor to the European Bank of Reconstruction & Development, Christopher Beauman told delegates at Platts Steel Business Briefing’s third annual Green Steel Strategies conference in Berlin.

Some funding is being made available in Europe, pointed out Baroness Worthington of Sandbag which campaigns for action on climate change. The European Commission has made revenues from the sale of 300m carbon credits available to CCS projects, with a current market value of around €2.25bn ($2.97bn).

However, the funding is not sufficient to counteract the huge cost of investment. A relatively cost-efficient steelmaker would become unsustainable if it carried the cost of installing CCS alone. The funding in Europe is insufficient and there is even less of it available in other regions, Beauman argued. Furthermore, the funding that is available is focused almost entirely on the power sector.

In Europe the only steelmaking CCS project remains ArcelorMittal’s project at Florange in France. This intends to develop a top-gas recycling blast furnace which will produce waste gases with no carbon monoxide, making them suitable for underground storage. Part the Europe’s Ultra-Low CO2 Steelmaking (ULCOS) project, the plant is expected to generate results by 2014.

There is some chance that CCS funding will become available in China as Beijing has noted that it is a technology it wants to develop in the current five-year plan (2011-2015). However, this too is likely to be focused on the power sector and the availability of storage sites may also be an issue, Beauman said.

ArcelorMittal has no plans to sell EU carbon allocations

Yet another report on the EU steel industry’s surplus EUAs: this time from Sandbag. I would say it is fairly inevitable that the steel industry in Europe has excess allowances for 2008 and 2009, given the 30% decline in crude production in the EU in 2009. And given the declining cap on allowances/emissions in phase 3, also fairly predicatble that the mills would want to hang on to most, if not all their EUAs.

SBB 12 March ArcelorMittal has no plans to sell its surplus EUAs (European Union Allowances) gained under the EU’s carbon Emissions Trading Scheme (ETS). Moreover it tells Steel Business Briefing, any proceeds from any possible sale in the future would be reinvested into improving the company’s energy efficiency.

A recent report by UK-based climate campaigner, Sandbag, suggests ArcelorMittal accumulated a surplus of 14.4m EUAs in 2008, worth some €200m, and a further 42m EUAs in 2009. These figures were not confirmed by the company.

The report also claims SSAB, Corus, Salzgitter and US Steel gained surplus EUAs. The second largest surplus was held by SSAB which reportedly gained 3.25m EUAs in 2008. Again, these figures were not confirmed to SBB by the companies in question.

But ArcelorMittal has told SBB it had expected a deficit of EUAs in 2008 as the new regulations for Phase II of the scheme took effect. But cut backs in production during the downturn in 2008/9 lead to a reduction in emissions, generating a surplus in EUAs.

Though the EUAs have a high sale value, ArcelorMittal says it takes the long view and may need surplus EUAs in the future. Its emissions will increase as production picks up. Surplus EUAs carried into Phase III (2013-2020) could be used to cover excess carbon emissions in this period, the company notes.

Over the three years 2007-2009, ArcelorMittal made a $108m net gain from the sale of purchased international carbon credits, according to its latest annual report.