Sakari Tamminen industrial challenges and global climate policy en 11112014-päiv_
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Presentation by vuorineuvos Sakari Tamminen, Rautaruukki Oyj. Industrial challenges and global climate policy.
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Sakari Tamminen industrial challenges and global climate policy en 11112014-päiv_
- 1. Industrial challenges and global climate policy Sakari Tamminen 13.11.2014
- 2. 2 Steel is the basis for sustainable development Steel demand is expected to grow significantly in developing countries by 2050 Steel is one of society's basic materials. Steel is heavily involved in cleantech, including: • Production of renewable energy technologies • Resource and energy efficient construction • Low carbon transportat • Recycling technologies Steel consumption estimate for 2050 Source: World Steel Association 2012: Steel at The Core of Green Economy 20.11.2014
- 3. Two main routes for the manufacture of steel from recycling steel based electric arc furnace production carbon dioxide emissions differ from ore based blast furnace production to scrap steel based electric arc furnace production Metallurgic carbon is an invaluable raw material for the reduction reaction. Metallurgical carbon generated by the carbon monoxide gas from the ore is reduced to iron in a blast furnace. Once produced, steel can be used over and over again without loss quality. The availability of the recycled steel will limit significantly the emission reduction potential even 2050. It is not possible to increase the blast furnace/scrap steel more than from ratio 60/40 to ratio 56/44. October 2013 3 Recycling steel requires blast furnace steel
- 4. Steel is the most recycled material in the world. Yearly about 580 million tons of steel is recycled. Steel can be recycled completely , without losing its properties. By recycling steel less carbon is required for the reduction of iron. Different materials in the global recycling rates 650 600 550 500 450 400 350 300 250 200 150 100 50 0 Teräs Paperi Lasi Puu Muovi Alumiini Million tons Steel is recycled more than all other materials combined. Lähde: worldsteel 2012, Recycling of industrial materials in 2010 4
- 5. The steel industry in international competition Weak growth in demand view Tremendous pressure on the European steel industry The increased significance of raw material Over-capacity of production Increasingly stringent legislation The increasing threat of imports 5
- 6. China and other emerging economies maintain the steel market - Europe is stagnating Steel consumption 6 Million tons 1600 1400 1200 1000 800 600 400 200 World China EU 27 Source: World Steel Association Short Range Outlook 10/2013 Weak growth in demand view 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013e 2014f ~45% China's share of global steel market -4% The European steel market growth this year
- 7. 7 Steel industry production sites in the EU-27 Iron and steel industry directly employs 350 000 people in Europe. 65 000 jobs have disappeared in 2008-2012 Source:: Eurofer (2013) A Steel Roadmap for a Low Carbon Europe 2050 20.11.2014
- 8. 8 Increasingly stringent legislation European emission legislation is more stringent than in other countries EU emission trading system and global systems Source: World Steel Association 10/2013 Current mandatory emission trading and similar systems cover only 21% of the global production. The EU accounts for more than half of the targets and much tougher than the rest. There is no obvious solution which would bring the same rules for everyone.
- 9. 3 EU legislation from the industry perspective Climate Act? Regulation of wholesale electricity trading Third energy package Energy efficiency Fuel Taxes Act Energy Industry Act (EnWG) Trans-European integration MCP Reduction of GHG emissions Renewable Resource efficiency Biodiversity energy Electricity and Energy taxation directive RES policy 2030? Energy market Security of supply energy infrastructure? Energy efficiency Good water Clean air quality Industrial emissions directive RES directive Water framework directive Biocides regulation Bio-economy strategy Energy strategy 2020 Federal Water Act (WHG) Water management plans Energy and climate strategy “Energie-wende” Biodiversity strategy Federal Act on Air Pollution Control (BlmSchG) Bio-economy strategy Environmental Protection Act Energy roadmap 2050 EU ETS directive directive Electricity market Act EED to be implemented CHP Act (KWKG) Reg. on access to electricity network (StromNEV) EED to be implemented Biomass sustainability? Electricity Guarantee of Origin Act Electricity and Fuel tax Acts (StromStG EnergieStG) Emission Trading Act GHG emission trading Act (TEHG) Act on subsidies for RES based electricity Renewable Energy Sources Act (EEG) Transitional National Plans RoHS directive Waste REACH regulation CLP regulation Eco-design Energy labelling directive Seveso regulation Directive on batteries and accumulators Regulation on the EU Ecolabel Circular economy WEEE directive
- 10. Conclusion: Sector-specific emission-reduction potential has to be taken into account EU steel industry is able to reduce the CO2-emissions by 15% by 2050. CO2 emission reduction potential in the EU steel industry is estimated at 10 % in the period 2010-2030 (specific emission) Potential increase of 10 per cent subject to a number of breakthrough technologies in the commercialization and large-scale investments in infrastructure Even so the steel industry is not the Commission's proposed emission reduction path in 2030 nor 2050 The emission reduction paths must be built bottom- up approach based on sector, technical and economic potential 10 Bottom-up approach
- 11. Competitiveness of the climate policy A global problem requires a global solution Instruments need to make industry more competitive by ensuring a globally competitive energy prices, rather than increasing the allowance prices Not even on a long term the EUA price signal will enable the steel manufacturing breakthrough technologies for production use. The EU's climate targets should be comparable to other economic endeavors. Risk of carbon leakage must be prevented at all costs. 11 A comprehensive international climate agreement
- 12. Stainless steel: EU CO2 ETS costs gives advantage to imports and increases emissions EU 28 flat products: imports 12 from Asia have increased more than five times from 2004 [Kt] Data source: EUROFER European imports up to ~30% of supply, Asian imports grow increasingly • Stainless steel is produced in Europe from recycled steel by electricity – resource efficient business • The Emission Trading System (ETS) in Europe puts a price on CO2 • Electricity producers pass on CO2 costs to their customers but stainless industry cannot due to a world market and global prizing • Competitors from outside EU do not have additional ETS costs and therefore giving them a competitive advantage • Carbon leakage is a fact: Due to higher carbon intensity in raw materials and less efficient production replacing European production by Chinese imports increases global CO2 emissions • 20% replacement is increasing the global emission by some 4 million tonnes * 9% 26% 30% 25% 20% 15% 10% 5% 0% 1,400 1,200 1,000 800 600 400 200 0 2004 2014f Other Asia Imports share of total supply (rhs) * Estimate: Chinese stainless steel has 2,3 times higher total CO2 footprint than the European due to different raw materials, energy and transports. **European stainless steel direct emissions cathered from CITL
- 13. In stainless steel EU CO2 ETS costs are increasing import, • During EU CO2 ETS main growth of European stainless steel countries, GER, UK, FR, IT, S, SWE, FIN, EST etc. • In Europe Outokumpu & ThyssenKrupp stainless direct • These trends are continuing until EU ETS system will be 13 Carbon leakage and decrease of European jobs are facts in stainless steel decreasing EU production and jobs producers outside the EU, e.g. • Outokumpu, ThyssenKrupp: USA, Mexico, China • Aperam: South America • Acerinox: South Africa, North America, Asia • Closures / decreasing of production are fact in many EU employees decreased from 15 000 in 2004 to some 9000 in 2014 (estimate for 2016:7000). • Carbon and job leakage is a fact in stainless steel • The growth of the production outside the EU • Stainless steel production in Europe is increasingly replaced by Asian import causing dramatically higher CO2 emissions / tonne of stainless globally * reviewed and indirect electricity costs compensated EU mills cold rolled deliveries1 2006 & 2013 by destination [Mtonnes] [Mt] 0.5 3.2 0.4 2.3 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2006 2013 Europe Other 1 Data source: EUROFER, total cold rolled deliveries of European producers (currently Outokumpu, Aperam, Acerinox, AST). *) CO2 estimations based on international stainless steel Life Cycle data, data on raw materials and energy sources
- 14. 2030 energy and climate package • at least 40% emissions reduction from 1990 levels by 2030 – nationally binding – reduction cap will increase from 1,74 % to 2,2 % from 2021 onwards • at least 27% energy efficiency increase by 2030 – indicative at EU level • at least 27% renewable energy share by 2030 – binding only at EU level • 15% increased energy interconnections between member states by 2030 – binding only at EU level 20.11.2014 14
- 16. 16 Why EU Emission Trading Scheme (ETS) have to be reviewed? Source: Outokumpu
- 17. Summary • Steel industry in Finland is part of the sustainable solution. • Metals industry supports the global climate agreement. • Carbon and jobs leakage is a fact – directly and indirectly. • Competitive industry will create welfare – let’s keep the European industry competitive.
- 18. Back-up slides 20.11.2014 18
- 19. Emission reduction potential 2030 and 2050 Emission reduction potential compared to 2010 Reference year 2010 (specific emission) 2030 2050 Economically feasible scenario -9% -15% Theoretical maximum reduction, no CCS -19% -40% Theoretical maximum reduction, CCS in use -9% -57% Commission roadmap to low carbon economy 2050 (table 9, source: PRIMES,GAINS) Reference year 2005 (absolute emissions) 2030 2050 Total -35% … -40% -77% … -81% ETS -43% … -48% -88% … -92% Non-ETS -24% … -36% -66% … -71% 19
Editor's Notes
- Emission reduction potential due to steel use in other sectors is significant: net savings of 350 Mt CO2 per year The eight conservative examples considered demonstrate that CO2 savings outweigh the emissions created by the production of the necessary steel at a ratio of 6 to 1, resulting in net savings of 350 Mt CO2 per year. Special steels have key role to play in CO2 reductions According to BCG/VDEh case studies on eight CO2 savings applications for which steel cannot be replacedtechnically or economically by any other material, the yearly savings for the EU27 of these applications alonewould amount to at least 443 Mt CO2 in 2030. This amount has to be compared to the emissions released while producing the steel grades under consideration (70 Mt CO2) and the total EU steel industry emissions of approximately 220 Mt CO2 in 2010. Additional significant emission reductions could be established if the scope was extended to other steel uses. It can be concluded that the application of innovative grades of steel, developed and produced in Europe, will result in an amount of CO2 mitigation which is at least double of the CO2 emitted by the whole sector itself. In this respect, steel can be justifiably classed as a CO2 mitigator.
- Kansainvälisen teräsjärjestön tekemän selvityksen mukaan teräs on maailman kierrätetyin materiaali. Teräksen ominaisuudet eivät heikkene kierrätyksessä. Ruukin terästuotannossa käytetään valmistettavasta teräslaadusta riippuen 20–30 prosenttia kierrätysterästä. Vuoden 2011 aikana Ruukki alensi globaaleja hiilidioksidipäästöjä yhteensä 600 000 tonnia kierrättämällä terästä ja mineraalituotteita.
- Participation in emissions trading systems in Japan is voluntary Regional initiatives in the USA do not involve the steel industry Pilot regional emissions trading systems are being implemented in China and Brazil, but the details have been slow to emerge There are no emissions trading systems planned in Russia India has introduced Perform, Achieve & Trade (PAT); an energy efficiency based trading system Sectoral site specific reduction targets based on potential for improvement Despite some new initiatives, there is no sign nor likelihood of any international emissions trading structure that could lead to a level playing field for the steel industry This year Instruments already in force are being strengthened, e.g. EU ETS Trading schemes are being implemented in China on a regional pilot basis and have been adopted in South Korea Some governments, e.g. the USA, are exploring alternative routes such as regulating CO2 as an air pollutant Near Future Possible linking of existing trading schemes Uncertainty around the outcome of the UNFCCC negotiations for the new legally binding treaty in 2015 Wider scale emergence of shale gas as a lower carbon energy source Longer term It is anticipated that more regions will introduce emissions trading and/or other financial instruments
- In order for the EU steel sector to be able to step up its efforts and in doing so overcome the associated challenging technical, economic and political barriers, a number of conditions must be met. Firstly, ambitious climate objectives must be based on a commensurate industrial policy. This requires first and foremost sheltering the steel industry from distortive CO2 costs and providing access to energy and raw materials at competitive prices so that steelmaking remains a profitable activity in Europe. Future EU climate and energy policies must be such that they foster growth and attract inward investments. Second, supporting policies have to be put in place to facilitate the development and deployment of innovative technologies. The EU ETS on its own and as it is designed now is not able to bring breakthrough technologies into being in all sectors. Thirdly, the extent to which CO2 pricing and CO2 targets are applied must be determined in accordance with a sector’s ability to respond positively to such drivers. At the very least, this necessitates more differentiated treatment between the power sector and manufacturing sectors. ---- As a response to the current EU climate policy framework and the Commission Communication on a Roadmap for moving to a competitive low carbon economy in 2050, the EU steel industry in 2012 contracted the Boston Consulting Group together with the Steel Institute VDEh to assess the CO2 mitigation potential of the EU27 steel industry up to the year 2050. Based on the results of that study and after comparison with existing research, the European steel industry has developed its own ‘Steel Roadmap for a Low Carbon Europe 2050’, which includes recommendations for policy makers. The Steel Action Plan, presented by the European Commission in June 2013 and aimed at improving the global competitive position of the EU steel industry, acknowledges how much the steel sector is currently under pressure. In an increasingly global economy, this situation will not change any time soon. The EU must therefore refrain from unilateral climate action. Instead the EU should give the industry the means to develop the breakthrough technologies that are indispensable and at the same time until these technologies are available and affordable provide effective protection against distortions to competition. Investment is fleeing Europe. The unpredictable regulatory environment caused by repeated attempts to change the rules governing emissions is one reason for this development. But it would not take much to reverse this trend and restore a climate that encourages investment in Europe – investment in new technologies and products. -------- Päästöt vähentyneet -25% 1990 - 2010 samaan aikaan tuotanto vähentynyt 7,5 % CO2 emissions from EU27 steel production fell by over 25% between 1990 and 2010, from 298 Mt in 1990 to 223 Mt in 2010 (direct and indirect emissions calculated down to the hot rolling process). This decrease is mainly due to a partial shift from production using virgin ores to production by recycling scrap through the electric arc furnace route (accompanied by a contraction in production volume), efficiency gains, and, the decrease of CO2 emissions from electricity generation. Specific CO2 emissions decreased by about 15% from 1.508 to 1.293 tonnes CO2/tonne of steel over the same period. As for the 2050 horizon, the BCG/VDEh study projects – based on proprietary modelling – that the EU steel market will grow by 0.8% annually, leading to EU crude steel production of 236 Mt in 2050. The amount of scrap available within the EU is projected to grow by 0.9% annually, increasing from 96 Mt in 2010 to 136 Mt in 2050. Under these assumptions the BCG/VDEh study assessed the EU steel industry’s mitigation pathways via several abatement scenarios. ---------- The production share of the Scrap-EAF route, which has the lowest specific CO2 emissions, can increase to a maximum of 44 percent in 2050, limited by the availability and quality of scrap. The potential of incremental technologies improving the specific emissions of existing routes is limited. For BF-BOF, a maximum of around 10 percent would be possible. For Scrap-EAF it is around 27 percent, driven mostly by the upstream emission factor for purchased electricity, which is expected to decrease by 50 percent from 2010 until 2050 due to a higher share of renewables. Only a massive shift, which is not economically feasible under current circumstances, from BF-BOF to DRI-EAF as an alternative steel-making technology could lower emissions to the theoretical lower boundary of 38 percent over 1990 levels. From an economic perspective—under current circumstances—emissions could be reduced only by a combination of shifting Scrap-EAF (within the limits already described here), best practice sharing, and incremental technologies improving existing routes. This would bring absolute emissions down by a maximum of 10 to 13 percent and emissions per ton produced down by 24 to 28 percent compared to 1990 levels. The potential of Carbon Capture, Use and Storage (CCUS) to further decrease emissions is limited to 10 percent on top of the scenarios already discussed here Its technological and economical feasibility as well as its ecological innocuousness and public acceptance are highly uncertain, especially in Europe. ----------- However to date economic viability and general applicability of CCS in Europe raises many questions and at this point its large-scale feasibility is seen as unlikely. Figures pertaining to CCS costs in the steel industry show a high sensitivity to site-specific conditions. Recent research suggests that such costs would amount to a minimum of €50 per tonne of CO2 just for capture and without transport and storage in the case of the ULCOS blast-furnace top gas recycling. These numbers come from project calculations and this technology has yet to be proven at industrial scale. In the face of public resistance to CCS in a growing number of Member States, the costs relating to CO2 transport over long distances and storage are expected to have a high impact on steel production costs, depending on local conditions. Bringing the steel sector’s emissions further down would need the deployment of technologies like Hisarna (smelting reduction) or ULCORED (direct reduction) – both connected to CCS – or hydrogen-based reduction, should they prove technically feasible. Under a fully decarbonised electricity scenario, electrolysis could also be envisaged as a potential solution. From today’s perspective, it is not possible to predict which technology or combination of technologies is most likely to emerge.
- Komission tukimuslaitoksen JRC:n mukaan edes 200 euron päästöoikeuden hinta ei tuo kuin 19 prosentin vähennyksen In 2012 the EU’s Joint Research Centre (JRC) published a study called Prospective Scenarios on Energy Efficiency and CO2 Emissions in the EU Iron & Steel Industry.2 The analysis looks into the steel sector’s CO2 savings and energy efficiency potential up to the year 2030 from a cost efficiency perspective, thereby complementing previous modelling work done under the ULCOS programme.3 Under the assumptions used, the study concludes that the application of best available techniques and innovative technologies would lead, from 2010 to 2030, to a maximum CO2 emission abatement of 14% to 21%, assuming the deployment of innovative technologies like BF-TGR and CCS from 2020. The modelling suggests that the carbon price would have a limited impact in the uptake of new technologies, as even under a carbon price of €200 the overall sectoral reduction in CO2 emissions would only reach 19%. A follow-up analysis4 using the same model shows that, with much less conservative decision-making criteria on new investments compared to that assumed in the JRC report, the reduction in energy consumption and CO2 emissions could amount to around 18% and 65% respectively, confirming the prominent role BF-TGR should play as a mitigation technology. However as BF-TGR, and especially CCS, are unlikely to be commercially available by 2025, the expected potential would in reality be much more modest (in the case of CCS, its commercial availability at all is questionable). ---- Raportin yhteenveto on hyvä: havainnot ja perusskenaariot kattavia Eurofer ei ole sitoutunut vähennyspotentiaaliin, vaan osoittaa, mikä näyttää teknisesti ja taloudellisesti mahdolliselta Opex ja capex ovat todennäköisesti perusoletusten mukaan hehtaarilleen oikeat "keskiarvoistetussa" Euroopassa. Masuunireitti säilyy elinkelpoisena haasteista huolimatta. Vaikka tutkimuksen mukaan vähiten CO2-päästöjä tuottaisikin yhdistelmä, jossa EAF:ien osuus kasvaa dramaattisesti, se ei ole taloudellisesti, mutta ei myöskään ympäristön kannaltakaan realistinen skenaario (hiilivuoto Euroopan ulkopuolelle).