JSW extends lead as main steel beneficiary of carbon trading

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.

UN decision means more steel projects can register in CDM

Nearly 25 million CERs have been issued to emissions reduction projects in the steel industry so far. However, this number pales into insignificance compared with some othersectors. Some blame the bureacracy of the system and delays in issuance for holding back projects. But the industry has also been slow to utilise some of the opportunities presented to it. 

SBB 18 April The UN’s Clean Development Mechanism (CDM) could accept more steel industry greenhouse gas emission reduction projects because of a decision to revise a methodology, made at the latest meeting of the CDM’s executive board.

Changes to the methodology (ACM0012) which relates to projects that use waste gas, heat and pressure from any industrial facility (that could include coking, sintering, iron making and steelmaking) are designed to make it more broadly applicable, a UN official tells SBB.

Steelmakers can submit projects to the CDM using set methodologies and then earn Certified Emissions Reduction (CER) carbon credits. Some 23.8m CERs, with a market value of around €308.4m ($446m) have been granted to the industry to date, Steel Business Briefing estimates.

Kishor Rajhansa, programme officer at the UN Framework Convention on Climate Change (UNFCCC) introduced several CDM methodologies that could potentially be used by iron and steel plants to earn carbon credits at SBB’s recent Green Steel Strategies event.

He also invited steelmakers to submit new standardised baselines for their sector to the CDM Executive Board. These could allow the industry to claim greater benefits from the CDM. He pointed out that ArcelorMittal has recently had a methodology for its Brazilian arm approved, that will allow it to earn carbon credits by using ocean-going barges instead of trucks to transport material.