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Roderik Hömann

Energy and Climate Politics

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Steel's contribution to a low carbon Europe 2050 (BCG)

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Emissions Trading

Allocation is below the technical minimum

The steel industry takes its responsibility for climate protection seriously. Requirements for reducing greenhouse gases via emission trading must, however, be technically and economically feasible. CO2 savings can also be achieved by using steel.

Emissions_PNG

There is almost no CO2 trading outside Europe. The EU system has hardly proved inspirational to others.

Emission trading was introduced in Europe in 2005. The system is now intended to achieve a reduction in emissions of 21% (compared to levels in 2005) during the third trading period to 2020. Although CO2-intensive industrial sectors facing international competition receive their allocation free-of-charge, the amounts allocated are pegged to maximum product-specific emission values, so-called benchmarks. The benchmark set by the EU Commission for pig iron, however, is considerably below the scientific minimum for these emissions. The only alternative is to purchase additional certificates. This not only damages the international competitiveness of the steel industry, but also reduces the readiness of industries in other countries to join in emission trading.

The steel industry’s emission reductions

The steel industry takes its responsibility for climate protection seriously. As part of a climate-related agreement reached by German business, the steel industry reduced its CO2 emissions per tonne of crude steel by 15% between 1990 and 2012 – and this figure rises to 21% when considered in terms of finished steel products. The use of coke and coal for the chemical reduction of iron ore to pig iron is responsible for a major proportion of the CO2 emitted in steel production. Consumption of these materials has gradually been halved during recent decades, but is now approaching its chemical-scientific limit. A maximum cut in greenhouse gas emissions of about 10% by 2050 would be realistic for the European steel industry according to a study by the Boston Consulting Group and the Steel Institute VDEh.

Steel’s carbon footprint

CO2 savings can, however, be achieved by using steel. Innovative steels can save about six times as much CO2 when used in power stations, wind turbines or automotive light construction as is emitted during production of these steels.

Need for realistic allocation benchmarks for steel industry

Given the results of the last climate summit, no resilient international climate agreement that would include the main industrial emitters appears possible. The steel industry in Germany and Europe will therefore continue to operate in unequal international conditions during coming years, compared to countries such as China, Russia or the USA. Against this background, free-of-charge allocation for sectors facing international competition, as well as technically realistic benchmarks, are essential for preventing disadvantages in international competition compared to countries outside the European Union. In addition, the recently approved compensation system for emission-trading-related electricity price increases must continue.