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Climate policy and legislation

SSAB operates globally and is subject to many international agreements and to regulation particularly in the EU and US. SSAB actively monitors climate, environmental and energy legislation, and proactively prepares for future changes. The most significant operations in terms of environmental impact are located in Sweden, Finland and the US. The most relevant issues from SSAB’s perspective relating to environmental regulation are shown here.

Paris COP 21 and Climate Change Negotiations

SSAB welcomes the global agreement concluded in December in Paris. The United Nations Climate Change Conference (COP21) is important in defining the future of climate change policies. The Paris conference is a starting point for nearly all UN nations making their contributions to keep global warming below 2°C and aiming for 1.5°C. These contributions are estimated to deliver a 2.7°C increase in the global temperature, which means that further measures are needed. Since the national contributions made are not comparable to each other, the agreement lacks a level playing field that would protect the best performers in the steel industry.

For example, China has pledged to decouple emissions growth from GDP growth, whereas Europe has agreed to decrease its emissions by at least 40% compared to 1990 levels. The more balanced the national contributions are, the better competitiveness is taken into account and the risk of socalled carbon leakage is reduced. Efficient global curbing of emissions needs market mechanisms and carbon pricing. The European steel industry, which is exposed to fierce global competition, urges the next conferences of parties to create a level playing field market mechanism, as well as international measurement, reporting and verification obligations for all parties.

EU climate target 2030

In October 2014, the European Council summit set new more ambitious targets for greenhouse gas emissions, renewable energy and energy efficiency for 2030. To achieve the EU target of at least a 40% CO2 reduction, the sectors covered by the EU Emissions Trading System have to reduce their emissions by 43% compared to the 2005 baseline. Regardless of the result in Paris, the European Union is committed to significant emission reductions, which will come at a high cost even for the best industry performers. The European Commission gave its proposal for the new Emissions Trading Directive in summer 2015 and now the legislative process is ongoing in the European parliament and in Member States.

The European Council summit agreed that the most efficient industrial operators exposed to international competition should not be subject to a direct or indirect cost disadvantage resulting from the EU’s climate policy. For SSAB - and for all other steel producers in Europe - it is extremely important that the new directive of the EU Emissions Trading Scheme for the period of 2021-2030 creates a level playing field for efficient performers compared to our competitors outside the EU.

Current trading period of the EU Emission Trading System (EU ETS)

The new EU climate target for 2030 does not affect the allocation of free allowances for CO2 emissions for the current trading period. Nevertheless, SSAB believes that the company was awarded an insufficient number of CO2 allowances both in Sweden and Finland for the current trading period of 2013–2020. Thus, SSAB has appealed the current decision on free allocations to the Swedish Land and Environmental Court and the Finnish Supreme Administrative Court respectively. Both courts have requested a preliminary ruling from the EU Court of Justice (ECJ). SSAB Finland will have its hearing presumably in the first half of 2016.

US Climate Action Plan

In August 2015, the US Environmental Protection Agency (EPA) finalized new standards that aim to reduce carbon emissions from existing power plants. These standards are known as the Clean Power Plan and have been developed under the Clean Air Act. The EPA estimates that in 2030, the Clean Power Plan will result in a 32% reduction in CO2 emissions from the electric power sector in the US compared to 2005 levels. The Clean Power Plan sets different reduction targets for each individual state and each state must submit an individual state plan or multi-state plan, or request an extension, by September 2016. Industry groups and 24 states have already filed lawsuits challenging the Clean Power Plan. Republican lawmakers have introduced several legislative proposals in the US Congress to overturn or delay the regulation.

Environmental protection legislation

EU Circular Economy

The steel industry welcomes the EU Circular Economy Package, which was published in December 2015. The package sets out the objectives, tools and methodologies that should be used to ensure that steel products can be efficiently produced, used, reused, recovered and recycled in a constant loop. Steel is a 100% recyclable permanent material. The Package includes new measures encouraging the use of durable, resource-efficient and recyclable products in Member States. This should also expand the market of high-strength steels and wear-resistant steels provided by SSAB.

EU Industrial Emissions Directive

SSAB’s operations are subject to environmental permits with environmental conditions governing various parameters regarding production levels, air emissions, water effluent and waste management. Several SSAB production sites have operations that require environmental permits. SSAB’s Nordic production facilities are subject to the European Industrial Emissions Directive (IED) and preparations to comply with these requirements are in progress primarily in Luleå and Oxelösund, Sweden and in Raahe, Finland.
In connection with the IED, the Best Available Techniques (BAT) Reference Documents are to be followed. The Iron and Steel Production (IS) BREF document was updated in 2012. Large Combustion Plants (LCP) will be finalized 2016/2017. Other steel industry specific documents, like Surface
Treatment Using Organic Solvents (STS) and the Ferrous Metals Processing Industry (FMP) are under early stage of revision.

Sulphur Directive

Sulphur Emission Control Areas (SECA) for maritime traffic in the Baltic Sea, North Sea, English Channel and the Atlantic seaboard of the US mean that the sulphur content in fuels for vessels may not exceed 0.1%. The amended Sulphur Directive entered into force on January 1, 2015.

The Sulphur Directive is an important act toward achieving a sustainable environment. This includes, however, an increased cost for SSAB due to our location in the SECA area. That is why SSAB seeks ways to minimize the cost impact of the Sulphur Directive by route and transport mode optimization, transport efficiency management, minimizing empty runs, improving loading rates, subcontractor management and changes in contract structures, e.g., fuel and bunker efficiency clauses.

REACH

REACH, the European Union’s chemicals regulation, aims to improve the protection of human health and the environment against the risks of chemicals and to enhance the competitiveness of the EU chemical industry. SSAB manufacturers, imports and uses substances and articles to which REACH applies. We submit information about the registration of substances and of any hazardous substances in the supply chain. SSAB employs a safety data sheet management system to improve management of up-to-date information about the use of chemicals. In addition, SSAB communicates with stakeholders about any requirements regarding REACH and SSAB’s products when obligations change. SSAB works together with the supply chain to replace substances regulated by REACH with safer ones as soon as possible. Queries about REACH matters can be submitted to reach@ssab.com.

Ozone National Ambient Air Quality Standards (NAAQS) - US

In October 2015, the Environmental Protection Agency (EPA) issued its final rule to revise the National Ambient Air Quality standards (NAAQS) for ozone. The rule sets the primary air quality standard for ozone at 70 parts per billion (ppb) averaged over 8 hours and expands the monitoring season. Domestic manufacturers are concerned that some locations in the US may violate the ozone standards due to background concentrations and advocate that the current standard of 75 ppb be maintained. Legislative efforts are underway in both chambers of Congress to prohibit the EPA from implementing the new regulations until 85% of the counties currently in non-attainment achieve compliance with the existing standard.

Waters of the US (WOTUS)

In May 2015, the US Environmental Protection Agency (EPA) and US Army Corps of Engineers (Corps) released their final rule defining “waters of the US” (WOTUS) subject to federal regulation under the Clean Water Act (CWA). The rule is an attempt by the agencies to provide clarity to the definition
of such waters following Supreme Court decisions on the matter in 2001 and 2006. Instead of facilitating efficient and effective regulatory protections for the country’s navigable waters, the final rule will broaden EPA and Corps jurisdiction. This could result in an increased need for permits and the potential for litigation that will negatively impact the operations of key aspects of economy. Further permitting delays can result in lost opportunities for economic growth and job creation. The rule is subject to a number of lawsuits across the country from states and stakeholder groups.

Energy and Electricity Market Legislation

EU Energy Union

The EU Commission issued its first package for implementing an EU-wide energy union in July 2015. The package includes, among other things, communication and consultation for electricity market design. The aim is to create an efficient electricity market by, for example, improving price signal steering. SSAB believes that the energy only market model is the best way to secure a well-functioning electricity market. Prices will reflect the scarcity of available transmission or production capacity in energy-only markets. The possibility to actively participate in the market through the right price signals should be provided.

EU’s Energy Efficiency Directive

The European Council summit has set a target to increase energy efficiency by at least 27% by 2030, based on the 2005 baseline. In order for the EU to achieve this target, the industry needs to meet with the requirements that are implemented in the legislation at a national level. SSAB regularly carries out energy audits at sites and works systematically to continuously identify energy savings, which is in line with the European Energy Efficiency Directive (EED). A review of the EED is anticipated in the second half of 2016.