Authors: M.Freislich, S.Gale, P.Duncan, N.McClusky
Metal Bulletin, Steel and the Environment, Carbon Abatement and Trading, London September 2008
2nd International Symposium on Sustainable Ironmaking,
August 2008
Abstract
This paper will describe a methodology to quantify and qualify the potential CO2 abatement and abatement costs within steel businesses. G-CAP (Greenhouse gas Carbon Abatement Process) is a bottom-up hybrid techno-economic methodology linking operationally achievable CO2 abatement to strategically responsible corporate goals. It has been used by Hatch to generate Marginal Abatement Cost Curves (MACC) for New
Zealand Steel, BlueScope Steel and OneSteel. It is now being used to create the MACC for the Australian Steel Sector as a whole. A generic MACC is shown at Figure 11 and generalised MACC at Figure 18.
Legislators around the world are responding to climate change by limiting and placing a price upon CO2 emissions. The financial consequences of this vary depending upon the CO2 intensity and ability of the sector to “pass on” any increased production costs. The iron and steel sector is particularly vulnerable due to the close-coupling of production to CO2 emissions and significant global trade in the commodity from regions without CO2 pricing. Legislators recognise this and are providing temporary concessions to the steel
industry and other so-called Energy Intense Trade Exposed Industries (EITEI).
These concessions are limited and are offered to provide partial shelter from the
immediate economic impacts of carbon trading. Governments have an expectation that all
businesses including EITEI’s contribute to national abatement. Thus the basis for
negotiations between governments and industry is in defining what economic CO2 abatement is achievable. Setting a sectoral target too low transfers a higher burden to
another sector and inhibits rapid transition to carbon-competitive businesses. However
setting the target too high erodes industrial capacity due to the cost burden.
Top down economic modelling has been the primary tool used to establish the expected
economic impacts of pricing CO2 . This methodology is appropriate for sectors such as
electricity where international trade is limited, the supply chain simple and production
processes uncomplicated. However in the EITEI sectors economic modelling struggles to
adequately define the impacts of CO2 pricing. The models are too sensitive to variables
such as international trade and process complexity. In negotiations all parties are uneasy
relying on the forecasts of these existing models.
