Climate issues and carbon emissions trading

Steel production in the world unavoidably generates carbon dioxide. Emissions from steel production mainly derive from the use of carbon in the form of coke for the reduction of iron oxide to iron. Other carbon dioxide emissions derive from the use of fossil fuels in furnaces for melting, reheating and heat treatment. More effective alternatives to carbon as a reducing agent do not exist at the present time and it will be a long time before new technology is available that radically cuts emissions.

Swedish iron ore-based steel production achieves carbon dioxide emission savings

Steel is produced on the one hand from iron ore and, on the other hand, from scrap with the latter process generating significantly less carbon dioxide since no reduction process is included. Owing to the steel consumption trend in the world, however, not all steel can be made from metal scrap; the supply of scrap metal is simply insufficient so newly mined iron ore must be used. Around 75 per cent of the world’s steel production is ore-based.

In Sweden, the ore-based production of steel accounts for about two-thirds of the total production. In comparison with many other countries, Swedish steel production achieves carbon dioxide emission savings through the following: use of magnetite ore, which requires less energy than hematite ore, efficient processes, highly developed products and practically carbon-free electricity production.
Read more in the section on steel production, Raw materials

Need for global solutions

The climate issue is a global problem and cannot be solved by individual countries or regions. The political measures must be developed through international co-ordination since they affect the preconditions for growth, consumption and production.

The most effective measures to solve the set of problems associated with climate change would be to draw up a global framework for the climate which all countries could follow. In connection with this framework, a more level and fairer playing field for trade and competition should be created; at the same time a joint framework would smooth the way to the implementation of the necessary emission cuts.

The shaping of the framework is of course important. Freedom for different parties to choose different measures and methods to achieve emission cuts must be weighed against competition neutrality and the practice of free trade. A global price for carbon dioxide would mean that the most cost-effective measures are implemented first, which would indeed be the most favourable development.

Steel is produced across the whole world. At the present time around one half of all steel is produced in China and Sweden only accounts for 0.3 per cent of world production. Steel is one of the most important materials when a country’s living standard is developed, since it is used in the construction of e.g. infrastructure and buildings. This means that the need for steel in the world will continue to increase in line with population growth and with the development of living standards for the poorer parts of the world.

The development of – and changes in – technology to enable steel production to achieve lower carbon dioxide emissions involve costly projects which cannot be financed by individual companies. It is thus essential that policies and control instruments support research and development, not distorting competition between steel producers in different parts of the world.

The Swedish steel industry is an efficient producer of effective and modern materials, whether seen from a functional or environmental perspective, and it operates in a global market. Products that are sold in the European market are exposed to international competition. The global currents of the steel trade are far-reaching; the import of steel to the EU is increasing sharply, above all from the so-called BRIC countries (Brazil, Russia, India and China).

In order for the steel industry in Sweden, and the EU as a whole, to be able to continue producing steel the environmental obligations they face must be the same as for competitors outside the EU. Extra costs, specific to Sweden or the EU, cannot be passed on to the customers. Unequal operating conditions will result in reduced investments, falling employment levels and shrinking production. All this will mean that production increases in other parts of the world where emissions per tonne of produced steel are greater.

European emissions trading

The European trading system for greenhouse gas emission permits is now in its third phase, 2013-2020. The emission allowances are auctioned to a large extent. However, heavy industry subject to international competition and considered to belong to the so-called ‘carbon leakage’ group (EU business at risk of moving to locations with less stringent climate policies) obtains a certain free allocation of emission permits. The assignment of emission allowances is based on carbon intensity (benchmark) multiplied by historic production level. The benchmark is set on the basis of the ten per cent best plants within the EU.

Depending on whether the world market, and thereby the production level, goes up or down this implies a deficit or surplus of emission allowances for companies. The emission trading scheme thus results in an indirect limitation on growth in Europe. 

Over and above the direct costs for emission allowances, companies pay, as all other consumers, the levy that is placed on the electricity price owing to emissions trading despite the fact that Swedish electricity is practically carbon free. There is a possibility for the EU member states to compensate certain industries for the extra cost but Sweden has chosen not to do this.

Our standpoints:

• The starting position for any measures to reduce climate change must be a global one.
• Within the EU emission trading scheme, the steel industry as a whole shall be included in the group adjudged to be exposed to carbon leakage.
• The benchmarks for the allocation of allowances shall be relevant and achievable and the allocation shall be based on real production levels.
• The steel industry shall be compensated for the impact of emission trading on the electricity price. 

Research

HYBRIT ‒ Carbon-dioxide-free steel production

HYBRIT is a project started by SSAB, LKAB and Vattenfall to solve the carbon dioxide problem in the Swedish steel industry. The goal is to develop an alternative direct iron ore reduction process.  By using hydrogen instead of coal and coke, water would be the by-product instead of carbon dioxide.

ULCOS – Ultra-Low Carbon dioxide Steelmaking

A major research programme called ULCOS has been ongoing within the EU since 2004, with support from the EU Commission. The goal was to reduce carbon dioxide emissions from ore-based steel production by 50 per cent. Most steel producers in the EU have been involved in the project as well as other companies and organisations. From Sweden there was participation by SSAB, the ore producer LKAB and Swerea Mefos (applied research within metallurgy).

ULCOS has examined four component parts: a new blast furnace process, a new smelting reduction process, an improved direct reduction process and the electrolysis process. The main interest from the Swedish side has been on the blast furnace process, where successful trials were carried out in LKAB’s experimental blast furnace in Luleå. To reach major reductions of the emissions this technique has to be combined with storage of carbon dioxide.

CCS

CCS (Carbon capture and storage), involving the collection and then storage underground of carbon dioxide, opens the possibility of rapidly cutting emissions. The steel and mining industries are working together in the research programme where the preconditions for transportation and storage of CO₂ in Sweden are being investigated.

Iron-Arc

ScanArc Plasma Technologies, in collaboration with Ovako in Hofors, is developing a new molten pig iron (hot metal) production method based on plasma technology. The method is called IronArc and results in only half the direct carbon dioxide emissions, compared with the blast furnace process, since electricity is used instead of carbon sources to generate heat.
Find out more about the IronArc research project (metalliskamaterial.se)