STEEL GRIPS online - Europe must steel itself to rethink its emissions policy

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May 10, 2012

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Gordon Moffat:
Europe must steel itself to rethink its emissions policy

Jun 1, 2011

No wind power without steel – on average, 70 % of a wind turbine is made from steel

The current global commitments for reductions in greenhouse gas emissions will not deliver the result seen as necessary by the IPCC to limit the global temperature increase to two degrees celsius to avoid dangerous climate change. On the contrary, the commitments made by world leaders in December 2009 in Copenhagen and thereafter will lead to a further massive increase in global emissions. The EU did not succeed in its self-imposed role as world climate leader - in order to lead you need followers; in this instance no one followed and the European unilateral targets are now self-defeating.

For example, the commitment made by China to reduce its CO2 emissions intensity by 40 % compared with business as usual effectively allows it to increase emissions by 75 % to 90 % by 2020. This is an increase of five billion to six billion tonnes of CO2 in just 10 years, an increase that alone will be more than today’s total European CO2 emissions.

Experts predict global annual steel production will grow from 1.3 billion t in 2010 to 2.3 billion t in 2020. This growth will be generated outside Europe, mostly in emerging economies, with an increase in CO2 emissions in the range of 2.5 billion t in the global steel sector.

These examples show that the climate battle cannot be won without adequate commitments by both developed and emerging economies. It shows also the absurdity of an EU climate policy that does not allow for growth of the most carbon-efficient steel companies in the world and that leaves even the best performers unprotected, with billions of additional unilateral costs.

The EU’s steel industry may have costs in the range of EUR 25 billion in the third EU emissions trading period (2013-20) - costs that its competitors do not have to bear. European companies will have less capacity to invest in R&D (research and development) in breakthrough technologies to reduce their own emissions and for innovative solutions that reduce emissions in other sectors. Yet massive investment in R&D and the deployment of breakthrough technologies is the only remedy for human-made climate change.

The idea of ‘cap and trade’ has been abandoned or rejected by every other major economy in the world - the US, Canada, Australia, Japan. Emissions trading is not the policy to drive climate action from manufacturing industry. Imposed on industries such as steel, which have process emissions that cannot be squeezed indefinitely, it simply imposes a burden that discourages investment, hampers growth, jeopardises competition and, if applied unilaterally, is environmentally counterproductive. This is why all other economies apart from Europe have rejected cap and trade.

The EU emissions trading directive and its 21 % cap fail to create a level playing field for Europe’s industries. While our global competitors grow quickly, the quasi-ban on growth under the ETS will directly lead to leakage of CO2, production and jobs. Further increasing the EU’s own target as currently discussed will just drive production out of Europe - not overnight, but a steady process that has already been running for some time due to the framework conditions in the EU. Leakage is a fact: a study by Policy Exchange shows that the EU is only on track to meet its Kyoto target because emissions have been “offshored” to countries such as China. It says that “the total EU carbon consumption - including, for example, the carbon produced during the manufacture of steel exported from China to Europe - shot up by 47 %” between 1990 and 2006.

The answer to climate change is not to force the delocalisation of industry, but to use manufacturing industry as part of the solution – only industry can find the solutions for a sustainable approach to climate change.

The European steel industry reduced emissions per tonne of steel by about 50 % between 1970 and 2005. Between 1990 and 2005 alone, reductions were 21 %. The industry is now close to the limits of what current technologies can do, and any further significant improvement will need the development of breakthrough technologies and heavy investment. Projects such as ULCOS (Ultra Low CO2 Steelmaking), with several promising new technologies to further reduce emissions from steelmaking, will need heavy investment if they are to be successful. However, the absurdity of the EU’s policy is that the revenues from auctioning of CO2 allowances and other eco-taxes do not flow back to serve the proclaimed goal of converting the economy as quickly and smoothly as possible into a low-carbon economy with competitive energy prices. These are, therefore, simply taxes that prevent rather than promote R&D.

The European steel industry has much to offer. It is an indispensable part of some of the world’s most successful value chains, developing and manufacturing in Europe thousands of different, innovative steel solutions.

The industry provides the foundation for innovation, durability, CO2 reductions and energy savings in applications as varied and vital as automotive, construction, machinery, household goods, medical devices and windmills.

A recent study by the Boston Consulting Group (BCG) on the German steel industry compares the CO2 savings from innovative steel applications – such as more efficient power stations, wind turbines or lighter vehicles – with the CO2 emissions from steel production. The study shows the savings potentials achieved through the use of steel are higher than the emissions from steel production in Germany. One-third of the German government’s plans to cut greenhouse gas emissions by 40 % in 2020, compared with 1990 levels, can be achieved with innovative steel. Many reduction potentials can only be achieved through the use of steel, and not with other materials.

On average, 70 % of a wind-power installation is made from steel. In the near future, greater installed power using large-scale turbines from 7MW up to 12MW and totally new designs for 15MW to 20MW will be needed to further improve efficiency. New steel solutions will play a major role in achieving this goal, for example for the tower and the generator.

It is crucial to preserve a strong, innovative and competitive industry. Unilaterally applied climate policy has to be shaped and implemented to protect the competitiveness of industry in Europe until such time as a global level playing field for internationally traded, carbon-intensive goods is established. Pressure on industry should therefore not be increased by further unilateral targets that are not supported by technology. Policy must support rather than hinder the development of the technologies necessary for carbon reductions. Only industry can provide the applications that are essential.

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