Steelmakers to monitor carbon emissions, setting a precedent.
A groundbreaking plan to monitor carbon dioxide emissions at steel plants worldwide has provoked controversy over how transparent the industry needs to be in the fight against climate change.By Peter Marsh
Of The Financial Times
The International Iron and Steel Institute, which represents the industry, is going ahead with plans to gather emissions data and share these privately among members without identifying individual plants or producers. This is to discourage the “naming and shaming” of companies, which could discourage many potential participants from joining the voluntary scheme.
In addition, there are as yet no plans to publish the data gathered, a course of action seemingly aimed at helping create policy for the industry at large without putting pressure on individual producers.
But some advocates are saying that the plan will be able to achieve its goal only by being fully transparent. John Elkington, founder and director of Sustainability, a London-based environmental consultancy, says: “I think the steel industry would find its scheme gained a lot more credibility if it committed itself to making the data publicly available.”
The steel industry is one of the world’s highest emitters of greenhouse gases, generating 4 per cent of global carbon dioxide emissions yearly.
Under the IISI plans, in about two years the institute would have a concise view of which plants around the world are good at limiting the amount of carbon dioxide they produce per tonne of steel manufactured and which are not. The information would be kept from the public domain, although it would be fairly accessible to individual steelmakers, and could be used to encourage the poorer performers to use new technologies to improve.
“I think a lot of people in the industry would be unhappy with a monitoring programme which appeared to be threatening,” says Ian Christmas, secretary general of the IISI. “We wouldn’t want a system similar to football in which managers at the bottom of the league table felt they were at risk of being fired.”
Lakshmi Mittal, chief executive and main owner of Arcelor Mittal, the world’s biggest steel producer, says: “I am definitely in favour of the [carbon dioxide monitoring] scheme. But I am not convinced that publishing all the data would help the process of limiting emissions.”
As well as being used within the industry as a guide to policy, the information gained from monitoring the plants could form the basis for a new set of policy initiatives by governments. It could influence whatever regime is adopted for tackling greenhouse emissions after 2012 when the Kyoto environmental treaty runs out.
Sectoral policy ideas such as this could apply to companies not just in the steel sector but in other industries that produce a lot of carbon dioxide – including electricity generation, cement, chemicals and aluminium. One idea is that businesses active in such areas could, in a post-2012 governmental regime, be awarded carbon dioxide “permits” by governments on the basis of how proficient they are at cutting greenhouse emissions per unit of economic output.
Those high up the performance “league tables” would be charged low sums for their permits, with those near the bottom subject to higher fees.
In this way, companies would be given an incentive to improve their environmental performance, while such systems could form a fairer way of handing out carbon dioxide permits than other ideas such as organising auctions or awarding them on a purely national basis.
Crucially, initiatives along the lines of the steel industry plan could, at least in theory, also involve companies in emerging economies whose governments feel they are not ready to sign up to current protocols such as the Kyoto treaty, yet whose businesses are large emitters of carbon dioxide.
In this context, the involvement of China – the world’s biggest producer of greenhouse gas – is considered crucial. In a coup for the IISI, the institute has gained the approval for its monitoring scheme of the powerful China Iron and Steel Association – which represents three-quarters of the Chinese steel industry, itself responsible for one-third of the world’s steel output.
Much of China’s steel industry has extremely low standards for carbon dioxide emissions, a result of old-fashioned production techniques that mean much more of the gas is emitted per tonne of steel than in western Europe, the US or Japan.
Zhang Xiaogang, chairman of the CISA and president of Anshan, a big Chinese steelmaker, says he will do all he can to persuade other Chinese steel producers to join the monitoring programme. He says he is fairly sure other big operators such as Baosteel and Wuhan Iron & Steel will agree to join the initiative.
Environmental groups have praised the steel industry project – which has gone further than similar schemes organised by other large global industries such as cement.
The cement business, for example, has had a fully fledged monitoring scheme for carbon dioxide for some years, organised by the Geneva-based World Business Council for Sustainable Development. But the project suffers the damaging flaw of having no current involvement by Chinese cement makers, which are responsible for half the world’s production of the material.
“This [the steel industry initiative] is a very positive development. If good-quality data about emissions can be obtained on a global basis for particular industries, the information forms the basis for sectoral agreements that could play a big part in future regimes for limiting carbon dioxide,” says Eileen Claussen, president of the Pew Center on Global Climate Change, a Washington-based research group.
Some in the steel industry believe the process of drawing up performance standards would work much better if members of the public could see – perhaps on a website – the individual plants that are good performers on carbon dioxide emissions and those that are not so good. Olof Faxander, chief executive of SSAB, a large Swedish steelmaker that also has several sites in North America, says: “I’d support the idea of public disclosure of the information as long as everyone agreed the data were robust.”
Others believe such public disclosure might not be in the interests of the steel industry and therefore would be counterproductive, as the scheme is voluntary.
John Surma, chief executive of US Steel, the US’s biggest steel company, argues that many steelmakers might not want to take part in the scheme if they know they have to publish their data and lay themselves open to criticism.
In opposition to this, Hu Wangming, vice-president of Wuhan, says he can see the point of publishing carbon dioxide data from his company’s China-based plants – if only to indicate that Wuhan’s environmental performance is a lot better than the Chinese industry average. “I think this [open publication of environmental data on a plant by plant basis] is a good idea,” says Mr Hu.
Many in the steel industry think they should concentrate first on getting their carbon dioxide monitoring scheme properly organised and validated – and only then worry about whether to publish the data. The sector may find, however, that the plaudits for its scheme are more likely to be stronger and longer-lived if it accepts early on that the data from the project should be open to scrutiny.
Copyright The Financial Times Limited 2007
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