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EU steelmakers likely to bank carbon allowances

08 Dec 2011 17:18:39 | edcm

Steel mills covered by the EU Emissions Trading System (EU ETS) now need fewer carbon allowances than this time last year because collapsing demand and prices in Europe has prompted mothballing of facilities across the continent since the summer.

Mills that don't use all their allowances are likely to bank most of them and carry them over into the next trading period of the EU ETS, beginning 2013, according to a spokesman for the European steel sector's representative body, Eurofer.

Banking is likely because EU steelmakers will receive about 20% fewer free allowances than needed from 2013 than they did in the previous phase of the ETS, from 2008 to 2012.

In addition, steelmakers are worried by the "cross-sectoral correction" clause in the ETS directive, it was added.

Under that clause, the maximum annual amount of allowances by which allocations are calculated could be revised downwards before 2020.

The world's biggest steelmaker, ArcelorMittal has shut down furnaces in France, Luxembourg, Belgium, Spain, Germany and Poland in the past six months. Most of these furnaces will remain closed until local demand recovers, although some closures have been made permanent.

ArcelorMittal plans to bank most of the resulting surplus of CO2 permits and carry them over into the post-2012 ETS, a spokesman for the company said.

"While we have extra now, we're keeping them because we believe we'll need them in the future," the spokesman said.

ArcelorMittal sold allowances covering 7 million tonnes of CO2 equivalent in 2010. The cash raised was spent on energy efficiency projects, he added.

On average, 1.9 tonnes of CO2 are emitted for each tonne of steel produced, according to the industry's global organisation, Worldsteel.

One closed-down ArcelorMittal furnace in Belgium, for example, produced 1.65 million tonnes of steel/year when it operated at full capacity.

ArcelorMittal had the biggest surplus of emissions allowances of any company in Europe in 2010, according to EU data (see EDCM 16 May 2011) with 31m.

In the economic downturn in 2008, many industrials sold some of their allowances to raise cash. VF

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