Steel and Aluminum Industries Tell ITC Devil Is in Details in Measuring Carbon

Large steel and aluminum corporations and associations representing small and medium-sized metal processors, recyclers and environmental advocates told the International Trade Commission that it's on the right track in the questions it's asking about embedded carbon in steelmaking and aluminum smelting, but that choosing detailed data is tricky, and, in some cases, not possible for smaller companies to produce. Broadly, there are scope 1 emissions, which are the greenhouse gases produced through onsite processes; scope 2, which cover the purchased electricity needed for manufacturing and scope 3, which cover the embedded carbon of inputs, whether raw materials or semifinished goods.

The ITC has been tasked with assessing Greenhouse Gas Emissions Intensities of the U.S. Steel and Aluminum Industries at the Product Level, something that is necessary when imposing its carbon border adjustment tariffs. The following comments were submitted in the form of written testimony.

American Iron and Steel Institute CEO Kevin Dempsey said that sheet steel products need more virgin iron, which is why they are more greenhouse gas-intensive than rods. "But a simple flat vs. long dichotomy is not adequate to capture the variation in emissions intensity among different product categories, as plate can be different than sheet," he testified at the ITC hearing Dec. 7.

Jeffrey Becker, a research consultant for sustainability and strategy at U.S. Steel Corporation, said the commission needs to adapt an internationally accepted calculation, such as the greenhouse gas protocol. "We provide a list of the specific upstream and steelmaking production processes whose emissions should be captured, whether under Scope 1 or Scope 3," he said. He said about 75% of the emissions from blast furnace carbon or alloy steelmaking is associated with coke or coal to melt the iron at the beginning of the process. "Tying the emissions intensity to a country where downstream processing, but not melt activities, occurs distorts the data picture of major contributors to steelmaking emissions," he testified.

U.S. steelmaking often is lauded as cleaner than international competitors', largely because more of it is done through electric arc furnaces (EAFs), which use more scrap metal and use less energy than blast furnaces.

Dave Miracle, general manager of environmental affairs of Nucor Corporation, the largest domestic steel producer, testified: "The American industry is among the lowest emitting in the world primarily because it is EAF-focused -- not because domestically mined iron ore is pelletized" or because of hydrogen used in blast furnaces in an attempt to get away from coal. He said more than 70% of U.S. steel production is in EAFs, and worldwide, the proportion is flipped, with 70% made in blast furnaces, also known as integrated steelmaking, and 30% in EAFs.

"Our products contain an average of nearly 80% recycled content and have one-third the emissions intensity of our integrated competitors," he said.

Miracle argued that cold rolling and coating products don't need to have their own reporting. "Almost all emissions occur between the mining stage and the hot rolling stage," he said.

Outokumpu, a Finnish multinational that makes stainless steel in the Americas with 90% scrap, according to CEO Tamara Weinert, touched on the overcapacity side of the global arrangement on steel, and linked it to carbon intensity. "Excess capacity is a threat to existing stainless producers in and of itself. But, worse, this new Asian production relies upon cheap, high-polluting nickel pig iron. Our high scrap EAF production at Calvert [in Alabama] results in approximately 2 metric tons of CO2-equivalent per metric ton of stainless steel. In contrast, Chinese and Indonesian stainless steel production from nickel pig iron results in emissions nearly 5 times that amount." So, she said, including emissions from the country where the steel was melted and poured is critical.

Camilla Kaplin, the head of sustainability data at Outokumpu, said the alloys' embedded emissions have to be counted, because if not, as much as two-thirds of stainless steel's embodied emissions would be ignored. That includes purchased metals, she emphasized. Her company suggested the ITC make five stainless steel product categories, and five subcategories.

Cleveland-Cliffs, a blast furnace dependent company, emphasized that only its processes produce the steel needed in the automotive industry and in the defense industry. He said current voluntary emissions reporting is only facility-specific or company-wide, so the ITC study is critical to filling gaps in the data.

The Specialty Steel Industry of North America, represented by Kelley Drye & Warren lawyer Joseph Green, said specialty steel, while it uses at least 75% scrap, is still more energy-intensive than carbon steel production because of its longer melt times. "Further, due to variation in heat times and raw material inputs, there is going to be variation in the energy-intensity of different types of specialty steels. Over 400 grades of specialty steel are produced," he said. So the organization said it should have a different benchmark. Only 2% of the emissions from steelmaking is from specialty steel, he said.

But, he said, even though it's only fair to measure product-by-product, that data, when made at a facility that makes many products, "is extremely hard to develop, and resource- and time-intensive, as we are learning in connection with the [EU] CBAM program. Mills generally lack energy consumption and other data from specific equipment. Each product has its own flow path, process times, and reprocessing rates, all of which can influence energy consumption. To gather and report all information on a product specific basis would likely entail adding costly software programs, additional staff and likely outside consultants to develop a reliable and accurate protocol."

He added, "Generally, SSINA members have a good handle on their Scope 1 and 2 emissions. Scope 3 emissions is the real challenge as, based on current feedback, few suppliers -- many of which are small businesses (particularly for scrap) -- have this information and lack the resources to provide it, certainly at a “facility-specific” level. Raw materials often are generated and procured from companies in foreign countries that are not likely to provide needed GHG-intensity data. While it may be helpful for the Commission to assist in generating Scope 3 data for raw material inputs -- most notably, alloying elements such as nickel, chromium, molybdenum, and manganese (and numerous others) -- such default factors should not be punitive and overstate GHG intensity...."

The Institute of Scrap Recycling Industries, represented by Adam Shaffer, assistant vice president for international trade and global affairs, argued that scrap should be treated as having no embedded carbon.

"As both steel and aluminum are infinitely recyclable, it would be nearly impossible from a carbon accounting perspective to determine when the embodied carbon within a steel or aluminum product produced using recycled material occurred," he testified. He said it could have been recycled 12 times before the most recent process. He also pointed out that it's not just EAFs that use steel scrap -- some integrated steelmakers use as much as 35% recycled steel in their processes.

The Silverado Policy Accelerator, a think tank that focuses on both trade and climate change, argued that national averages for products and implementation at the border tied to Harmonized Tariff Schedule codes is as important as facility emissions measurements and product assessment. Andrew David, vice president of research and analysis, told the ITC that it should use company questionnaires as little as possible, because public data allows other governments to replicate the measurements.

"We think that it is important that the Commission publish -- as part of its final methodology -- information on any key data gaps for which additional U.S. government data collection is needed or for which new or enhanced modeling approaches need to be developed to improve estimates of industry-specific emissions intensities," he said. He also said the ITC should estimate as many products as possible from the Office of the U.S. Trade Representative's specific list.

"We suggest that the Commission revise the system boundaries to ensure that it is a true cradle to gate approach that captures early stages of production that are currently excluded from the Commission’s questionnaire. It is not clear why bauxite, iron ore, coal tar pitch, and calcined petroleum coke are excluded from the system boundaries," he testified.

Steel accounts for about 8% of global greenhouse gas emissions, and aluminum 2%, but aluminum production is extremely energy intensive.

Aluminum Association CEO Charles Johnson testified: "The U.S. industry benefits from -- and is frankly reliant upon -- multiple low carbon primary aluminum smelters in Canada which use renewable hydropower...."

He said the association thinks the ITC's approach is on the right track. But he added: "We are sensitive to the burden that data collection and completion of the questionnaire will place on covered facilities and ask that the Commission seek ways to balance that burden with the need to gather necessary information to support calculation of product carbon footprints."

Forging Industry Association CEO James Warren also pointed to the challenge of data collection among smaller firms. "While some forging companies may already have the ability to capture much of the data requested in the draft questionnaire, others would likely rely on general industry data and the FIA or European forging sources in their responses," he said.

The association said it doesn't have any information about site-specific emissions at forgers. "FIA members are not reporting that they currently have a mechanism in place to capture in realtime the greenhouse gas emissions from their facility. If it were technologically feasible to calculate the emissions, a forger would likely engage with a third-party firm and/or purchase and install specified monitoring equipment. Particularly for our smaller manufacturers, this is likely an insurmountable burden."

He argued that the energy used at forgers is based on what's priced competitively, and there may not be a renewable source available.

"Forgers of all sizes have data readily available on the consumption levels for their various inputs, including aluminum by type. The source of the aluminum is not always clear, however, as some lower-volume manufacturers rely upon service centers, warehouses, and other suppliers as they lack the purchasing power to order directly from the smelter or mill," he said.

But if those forgers want to export to the EU, they will need the embedded carbon of their inputs, according to the testimony of the EU's Vicente Hurtado Roa, head of the CBAM unit. "Where operators purchase precursors, they need to obtain data on the embedded emissions of precursor materials used in the production of the CBAM goods from the supplier of these precursors," he testified. "Operators must also communicate to the importer(s) the carbon price due for the production of the good within their jurisdiction, if any. This includes the carbon price per tonne CO2, and the amount of free allocation or any other financial support, compensation or rebate received per tonne of the product relevant for the CBAM."

"In cases where the information on embedded emissions is not available at the time when the goods are being imported, importers will be able to use default values on CO2 emissions to determine the number of certificates they need to purchase. Importers will be able to demonstrate actual emissions during a reconciliation procedure and surrender the appropriate number of CBAM certificates accordingly," he said.

SAFE, an association that advocates for the materials needed for a green transition, noted that aluminum is central to those needs. Joe Quinn, vice president of strategic industrial materials at SAFE, said that while the global arrangement on aluminum focuses on Chinese overcapacity and high emissions, he argued that overcapacity is not the main reason primary aluminum production is falling in the U.S. -- it's the availability of affordable energy.

"The smelting process requires a constant stream of electricity. As such, it accounts for 68% of energy in primary production and 75% of carbon emissions," he said.

Alcoa Corporation's Laura Chambers, director of corporate affairs for North America and Europe, said the electrolysis process used in smelting "requires a massive amount of energy, making it one of the most energy intensive industries. On average, 14 megawatts of electricity are required to produce one ton of aluminum."

Chambers said China isn't quite as dirty as its reputation -- about a quarter of the power it uses for aluminum smelting is hydropower, so it's India that's the most coal-dependent.

"Scope 1 emissions are fairly similar across the industry," she said. "When you look at Scope 1 and Scope 2 emissions combined, countries like Canada are top performers at an average of 2 tons of Co2 equivalent per ton of aluminum produced -- similar to the footprint of our Massena operation -- while India -- due to its coal power generation -- averages 16.8 tons of Co2 on a combined Scope 1 and Scope 2 basis."

Chambers said those who make aluminum products with primary aluminum have much lower on-site emissions, so the ITC must require secondary producers to report the country of smelt. "Failing to capture those emissions would provide a loophole in GASSA, giving unfair advantage to remelters, (without addressing high polluters outside of the U.S.) and encouraging remelters to use metal with a high emissions intensity -- which is often cheaper...."

She also said that pre-consumer scrap needs to be counted toward embedded emissions, "i.e. new, clean scrap generated during the fabrication of primary aluminum into value-add aluminum products of various shapes. Such pre-consumer scrap, which can be immediately re-introduced into the secondary production process without going through the full lifecycle, should bear the same ‘embedded’ emissions as the primary metal from which it has been generated.

"If not designed properly, a tariff on primary aluminum may lead to higher imports of aluminum-intensive semi-fabricated and finished products that destroy domestic demand and could be imported duty-free from non-market economies and could be highly carbon emissions intensive, defeating the purpose of GASSA."