Green Steel Certificates come at a premium but the steel isn’t actually “green” steel So are they really worth buying?
At a typical rate of over 2 metric tonne of CO2e (Carbon emissions equivalent) per 1 metric tonne of steel produced, there isn’t a simple solution to the emissions challenge the steel industry faces. That’s the carbon equivalent of a flight from Heathrow to Santiago, Chile for every tonne of steel produced. In 2021 alone, according to worldsteel.org a total of 1,951 million tonnes of steel was produced across the world. That’s a lot of emissions!
But steel is intrinsic to the construction and functioning of our society so how can manufacturers, suppliers and users ensure the CO2e of steel is reduced to such an extent that we can get to Net Zero by 2050?
What will it take to get the steel industry to Net Zero by 2050?
Most suppliers are working hard at reducing emissions with two of the UK’s biggest suppliers, Tata Steel and ArcelorMittal, implementing a number of revolutionary initiatives during the last few years to reduce their carbon emissions. Take a look at our previous blog The Climate Emergency & the UK Pre Painted Steel Sector to see what they were doing in 2022. We’ll have a new blog out later in 2023 detailing the advances made since then.
Getting to Net Zero will require transformation on a massive scale and a transformation of this magnitude will take significant financial investment; a report from CRU in 2021 stated that it could cost $435bn to move Europe entirely away from coal to Hydrogen steel making.
Partnerships such as the one between Velux and ArcelorMittal help fund the transition and put pressure on steel producers to make industrial quantities of Low Carbon Steel in the long term.
Time is the other obstacle to developing significant carbon reduction initiatives. Going from idea, through to prototyping, testing of concept, upscaling to full implementation, to actual CO2e reductions can take many, many years. Many of these extraordinary innovations are having a big impact but will need more time to scale them up to have a significant impact. ArcelorMittal’s Carbalyst plant is one such project in Ghent that Benbow Steels had the privilege of visiting recently.
Steel companies have been looking at ways they can help customers reduce their CO2e immediately rather than wait for these initiatives to take effect and to find ways to fund these initiatives: this is where Green Steel Certificates fit in.
What are Green Steel Certificates?
The initiatives that steel companies such as Tata Steel and ArcelorMittal have implemented to date have saved significant amounts of CO2e but if these savings were shared across all of the steel they have sold, the actual reduction per tonne would be tiny: if the savings are bundled up and related to a specific purchase, the savings per tonne can then be substantial and meaningful.
Steel manufacturers therefore determine, through the use of an official third-party verifier, the quantity of CO2e they have actually saved and apply this to a pre-defined quantity of steel. This means the actual embodied CO2 footprint of the steel itself may not have changed, but there is a guarantee that the steelmaker has reduced the specified amount of CO2e within their operations.
Green Steel Certificates represent these savings for the specific steel purchased and both ArcelorMittal and Tata Steel use DNV to verify and validate the CO2e savings used for their respective Green Steel Certificates. The savings (and therefore the certificate) can never be duplicated and must be tracked. DNV explains this process in more detail: Green Steel Assurance.
- Find out more about Carbon Lite Certificates from Tata Steel UK here.
- Find out more about ArcelorMittal’s Xcarb Certificates here.
What are the benefits to the buyer of Green Steel Certificates?
By purchasing Green Steel Certificates alongside their steel, buyers can declare the equivalent reduction in their Scope 3 emissions which will reduce their overall officially stated carbon footprint.
What are Scope 3 Emissions?
When a company assesses their carbon footprint they have to consider the impact they have across every aspect of their operations, ie what comes in, what happens internally and what goes out. This is defined as Scope 1, Scope 2 and Scope 3 emissions. Deloite explain this particularly well:
• Scope 1 emissions— This one covers the Green House Gas (GHG) emissions that a company makes directly — for example while running its boilers and vehicles.
• Scope 2 emissions — These are the emissions it makes indirectly – like when the electricity or energy it buys for heating and cooling buildings, is being produced on its behalf.
• Scope 3 emissions — Now here’s where it gets tricky. In this category go all the emissions associated, not with the company itself, but that the organisation is indirectly responsible for, up and down its value chain. For example, from buying products from its suppliers, and from its products when customers use them. Emissions-wise, Scope 3 is nearly always the big one.”
Scope 1 and 2 are therefore within a company’s direct control: you can change your utilities supplier, you can make your product more efficiently etc…. Whereas Scope 3 is dependent on all the people who provide you with services, products, labour and custom and therefore much further out of your control. Scope 3 emissions are the ones you can reduce by buying Green Steel Certificates.
As Scope 3 emissions are as important to a Carbon Footprint declaration as Scopes 1 & 2, it is essential that everyone in the supply chain is doing something significant to reduce their CO2e.
Since 2013 companies listed on the London Stock Exchange have been required to report their Emissions within their Annual Report. There are currently no targets, penalties or limits for companies who report a high Carbon Footprint but the market is placing more and more value on sustainability so many companies want to show that they’re doing their bit. Many other companies are also using Environmental Sustainability to differentiate themselves and, as such, want to show that they, their products and projects have low carbon footprints. Green Steel Certificates provide an excellent solution for companies who want, or need, to demonstrate their eco credentials to their customers and shareholders. They show clearly that a company values protecting the Environment and puts lowering their CO2e high up in their priorities.
Green Steel Certificates also support, and speed up, the decarbonisation process for the issuing companies. The money generated from the premium charged for the Certificates is committed to being invested back into business to continue developing decarbonisation projects. This approach is a form of “insetting” rather than the “offsetting” approach that began in the early 2000’s.
Insetting vs Offsetting
In the early 2000’s companies started to give consumers the ability to pay to offset the carbon incurred by a given activity. For example, paying to plant a tree alongside the purchase of airline tickets to offset the carbon from the flight.
We would have to plant around 80 trees to mitigate, or “offset”, the CO2e of our steel equivalent flight to Santiago (and just to note, we’d have to plant over 156 billion trees to offset 1 year’s worldwide steel production).
The strategy was intended to directly mitigate the negative CO2e effects of the purchase, but no one was expected to change their behaviour- i.e. the consumer still flies and the airline still emit all the emissions they ever did: but it was a start- and we had to start somewhere.
Whilst more elaborate offsetting schemes grew, companies and consumers appreciated that offsetting wasn’t enough to make a difference to the climate crisis long term. Something more substantial and transformative was needed and companies needed to find a way to fund their CO2e journey. This led to “insetting”. According to the International Platform of Insetting (link-), Insetting can be defined as:
“….a way for companies to harmonise their operations with the ecosystems they depend upon and transition to a more sustainable business model.”
In other words, it describes the approach of investing in projects and initiatives within a company’s own operations to reduce their CO2e rather than spending the money “offsetting” elsewhere.
Are Green Steel Certificates worth buying?
Green Steel Certificates are part of the early stages of the Net Zero journey and play a pivotal, albeit transitional, role. As consumers and companies mature on their Net Zero journey, suppliers will be expected to make real, valuable CO2e reductions that are passed onto every customer across every product. Until then, companies can buy Green Steel Certificates to show an immediate and significant reduction in declared CO2e.
Although not all companies will have sufficient market appetite to absorb the premium that comes with Green Steel Certificates, those that do will be seen as Market Leaders and will stand out from their competitors.
Pressure is building on companies to demonstrate that they’re taking the Net Zero challenge seriously. Until suppliers can produce industrial quantities of low carbon steel Green Steel Certificates will be the only way a company can demonstrate that they’re doing what they can to lower their CO2e for their products.
If you’re looking for more tips on how to reduce your carbon footprint take a look at our blog Top 20 Hacks to reduce your Carbon Footprint as an SME Manufacturing Business.