Corus chief warns of European steel threat

Author: By Tricia Holly Davis in Poznan

He said that state aid was needed to help steel companies research and develop
new technology to cut carbon emissions, warning of the danger of ‘carbon
leakage’ from countries like China where production would likely migrate.

“If we are forced to buy CO2 credits on the market without a system to
improve our production process, then we will not produce steel in Europe,”
said Mr Varin, who is also chairman of the World Steel Association’s Climate
Change Policy Group. “To cut carbon emissions of steel production, we
need breakthrough technology, but this is extremely expensive, costing ?200m
to ?300m to upgrade a one million ton production plant.”

Varin, who spoke exclusively to the ‘IoS’ at the UN Climate Change conference
in Poznan, said: “There is no way for us to fund this and pay penalties
for our CO2 emissions. This would wipe out all of our profits and put us at
a competitive disadvantage with manufacturers in nations which are not
subject to carbon caps.

“The only way forward is through improved technology, but this costs
money and a carbon tax is not the answer, because manufacturers will just
move the growth to other countries. Not only will that kill European
industry, but we will produce twice as much CO2.”

Corus employs around 25,000 workers in the UK and is in negotiations with
unions over pay in an effort to curb large redundancies.

Estimates suggest that every ton of steel produced in China, where factories
are older and less efficient, creates twice as many emissions as in Europe. “Our
customers will still need steel, so they will have to import from China or
another developing nation and then you have the added CO2 associated with
shipping,” Mr Varin said.

The steel industry, which accounts for 4 per cent of global emissions, was
seeking to replace current carbon abatement schemes established under the
1997 Kyoto Protocol, with a “sectoral agreement”, he said. Such a
system would give manufacturers free carbon allowances up to an industry-set
benchmark and encourage technology transfer between East and West.

Steelmakers also want emissions reduction credits for deploying new
technologies such as carbon capture and storage, which is currently excluded
from the Carbon Development Mechanism.

Mr Varin’s suggestion of a sectoral agreement process for carbon credits was
criticised by environmental campaigners. A Greenpeace spokesman said: “Replacing
emissions caps with a sectoral approach would mean the end of the Kyoto
principles and would be disastrous for the price of carbon.”

EU leaders meeting in Poznan agreed to reduce greenhouse gas emissions by 20
per cent by 2020.

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