Benchmarking of Integrated Steel Plants

1
9.
Iron and Steel - Integrated Steelworks
9.1
This Section
This section covers Integrated Steelworks (Contract L), as part of an overall project for DTI
on EU Emissions Trading Scheme (ETS) Phase II UK New Entrants Spreadsheet revisions.
Electric Arc Steelmaking is covered separately in Section 10.
The overall aim of this project is to validate and revise appropriately the existing New Entrants
(NE) allocation spreadsheet. The following sub-sections present the findings for this sector.
9.2
Background
The basic process of the integrated iron and steel industry in the UK is the chemical reduction of
iron ore to form steel products by the blast furnace / basic oxygen steel making route. The three
integrated sites in the UK, located at Port Talbot, Scunthorpe and Teesside, each operate the
same basic process that consists of five distinct stages. These are:
1. Coke making. The majority of the imported energy into the iron and steel process is in
the form of coal, 83% 1 of which is converted into coke prior to being used in the blast
furnace.
2. Sintering, in which the iron ore is roasted in preparation for converting to iron.
3. Blast furnace, in which the sintered ore, limestone, coke and other fuels are chemically
reacted to reduce the iron ore to a crude metal called pig iron, which contains
approximately 4% carbon 2 .
4. Steel making, in which the conversion of iron to steel is carried out by a process called
basic oxygen steel making (BOS) where the carbon level is reduced to approximately
1%. This is requires the use of high temperature furnaces and oxygen injection.
5. Secondary steel making, in which the output from the steel making is reheated, shaped
and treated to give a wide range of finished products such as bar, plate, sections, strip,
coil and long products.
The type of steel output from the stage 4 processes is in the form of slabs, blooms and billets.
The measurements of production are based on the weight of steel tapped out of the BOS plant
and are typically measured in tonnes of crude steel.
The primary processes use large quantities of raw material, heavy and often very hot or molten
intermediate products and produce large amounts of waste and partially spent fuel gases that can
be reused in other processes. The operations are very energy intensive with the energy
accounting for 47% of the gross value added of the sector 3 . To put the energy use into
perspective it is useful to consider that each site consumes a similar amount of fuel in a year as
would be used by a 2 GW coal fired generation station running on full load in the same period.
c:\temp \ian's stuff\non- confidential - sec 9 i&s (integrated works) final report 110406.doc
April 2006
Over the last 20 years the production of crude steel from three sites in the UK has been in the
range 9 - 14 million tonnes per year with the low point of 9 million tonnes occurring in 2002 4 .
Production has recovered from this point and stood at 10.2 million tonnes in 2004.
The main greenhouse gas emitted by the sector is carbon dioxide derived from the combustion
of the fuel and intermediate fuel gases (the origin of these is discussed below) used to heat the
furnaces and from the process emission from a number of different sources including the use of
limestone in production of sinter from iron ore and from the use of dolomite lime as a flux in the
BOS process.
Scope of Activities to be Covered by this Report
The principle activities of primary and secondary steel making are included in the EU ETS
Schedule 15 classification for Phase 1. Additionally, it was agreed that a working assumption
for this study was that additional combustion activities at integrated steelworks including rolling
mills, re-heaters, annealing furnaces and pickling should also be included within the scope of
this section. The full range of activities that could be carried out at integrated site is shown in
Figure 9.1.
April 2006
Figure 9.1
Process at an Integrated Steelworks

Sintering
Coke
Making
Offcuts/
cap
Recycled
Steel
Blast
Furnace
Upstream
BOF
Processes
EAF
STEELMAKING
Continuous
Casting
Note: Both upstream and

downstream processes occur
at the larger integrated sites.
However,
downstream
processes can occur at stand
alone sites
Ingots/
Moulds
Primary
Mill
Cast Shapes (Billets,

Bloo ms, Slabs)
Downstream
Tube
Mills
Hot Rolling
Mills
Seamless
Tubes
Processes
Flat
Products
Plate
Long
Products
Hot Rolled
Coil
Tube
Mills
Pickling
Rods
Bars
Drawing
Fabrication
Welded
Tubes
Sections
Cold
Rolling
Cold
Rolling
Cold Finish
Bars
Finishing : Plating ,
Galvanising ,
Annealing , Tempering ,
Cleaning , Anodizing
Product
manufacture
Product
manufacture
Product
manufacture
Product manufacture
Products
- T, L, U,H, I
- Rails
- Piling
April 2006
Integrated vs. Direct Approach to Allocation

The system developed for Phase 1 new entrants was based upon a concept of an integrated
approach whereby an allocation would be made for any increase in emissions from the whole
site due to an increase in capacity in any single production unit of that site. It is not unusual in
complex process operations, such as integrated steel works, refineries or chemical manufacture,
for the production in a down stream unit to be constrained due to the lack of upstream capacity.
However, as stated in a recent paper 6 , this approach may be changed for Phase 2.
For Phase II, government is proposing to move away from the integrated approach, and to
focus on developing benchmarks that correspond to the direct emissions from equipment
covered by the scheme.
As such, the agreed focus of this section is based on potential benchmarks under a direct
approach.
The development of a direct allocation methodology requires that a number of new parameters
are developed. It will be necessary to have emission factors for each individual production stage
as well as a transparent and verifiable parameter that defines production in future years. The
parameter most commonly used in the other sectors is the product of design production
capacity, defined in tonnes of product per year (or day) and a sector standard load factor/
utilisation factor.
In addition to the combustion units associated with the iron and steel making processes
integrated steelworks also include other combustion sources such as boilers for raising plant
steam and units for generating electricity. Benchmarking methodologies for other sectors cover
these process operations. One potentially significant consideration for integrated steelworks is
that the other combustion benchmarks are based upon natural gas whereas a higher carbon
fuel such as blast furnace gas may be used at an integrated iron and steel works.
Definitions of Capacity
The progress of the main metal product through stages in the integrated process, as shown in
Figure 9.1 follows a well-defined route. The production at any stage is easily quantified.
However, the complex nature of an integrated iron and steel works means that it is difficult to
define a value for production capacity of the different units. There are three types of capacity
figure commonly used in the sector:
Design capacity; for existing plant this can be based upon the identified throughput of the
specific plant under the current operating conditions, and for new / expanded plant this can
be based on the maximum (guaranteed) capacity it is designed for;
unconstrained capacity, based upon the maximum amount that the unit could make as
determined by its physical size and engineering alone and;
constrained capacity based upon the potential amount of production that the unit can
achieve within the constraints of the integrated site.
In addition to the sector definitions the EA uses a measure of capacity 7 in the sector guidance
note. It is Entecs view that this is based upon actual historic production and is therefore very
similar to the design capacity metric.
Any revision to the NE allocation methodology will need to take into account the different ways
that capacity is defined.
April 2006
Emission Factors
In addition to the issues on capacity discussed above there are also issues on the determination
of an emission factor.
The operation of coke ovens, blast furnaces and BOS furnaces produces large quantities
of combustible gas from the driving off of volatile substances and partial oxidation of
the carbon in the raw materials. These gases, referred to as coke oven gas (CO gas),
blast furnace gas (BF gas) and basic oxygen gas (BOS gas) each have different,
relatively low and variable calorific values which can make them difficult to utilise.
Due to this and other technical constraints, the extent to which they are used to fuel
different processes such as boilers, rolling mills and furnaces will vary on a site by site
basis. This introduces uncertainties when it comes to developing a standardised
emission benchmark for the different production stages particularly in the primary steel
making activities.
For secondary steel making activitie s, the tonnage of steel made is not necessarily
proportional to the amount of energy needed to make it, due to the variation in the ratio
of ore to scrap that may be used, and to different energy input requirements for different
grades of steel. Certain types of high grade steel for the aerospace industry may require
significantly more energy than normal grade steel for the engineering industry.
The level of the benchmark can be set at the sector average, at a top decile value, at the
level of the best actual site, or at a theoretical best achievable level. In the latter case
it may be that there is no single site that actually achieves this level of performance.
The two different steel making routes, BF BOS and EAF (see EAF report) have
different emission factors for the production of the same type of steel. It could be
argued that in order to comply with best practice the lowest overall emission factor,
regardless of route should be applied in the Phase 2 NE allocation system. However, the
products made by the two routes in the UK are significantly different. Integrated
steelworks and EAFs make some of the same product types (e.g. carbon steels and
engineering steels) but EAFs tend to make more of the specialist steel products (e.g.
special steel alloys and stainless steel). The use of scrap metal feedstock at EAFs tends
also to preclude the production of low residual carbon steel (as obtained from the
integrated route) unless a source of clean iron is introduced.
The different steel making routes are used to a different extent in different countries
around the world with the mix being determined by a wide range of economic factors
such as availability of scrap steel, the availability of coal and the type of downstream
industry. This makes it difficult to determine an EU or global best figure.
Another issue is that of the applicability of the benchmark to the scale of the process.
There are integrated sites within the EU steel industry that could achieve relatively low
levels of emission per tonne of product within the sector but they may be very large
sites with high production capacities. The smaller integrated sites in the sector would
be unable to match the same economies of scale and would find that a benchmark
developed for a large site could result in them receiving an under allocation despite the
fact that each produce the same product.
April 2006
9.2.1
Phase I incumbent and new entrant installations
Identification of how sector is covered under EU ETS

The emission of carbon dioxide from the integrated iron and steel sector is covered under EU
ETS by the clauses in the Emissions Trading Directive and in The Greenhouse Gas Emissions
Trading Scheme Regulations 2005 8 shown in Table 9.1.
Table 9.1
Activities and Specified Emissions
Activity
Specified emissions
1. Energy Activities
1.1 Activities of combustion installations with a rated thermal input
exceeding 20 megawatts (excluding hazardous or municipal waste
installations).
Carbon dioxide
1.3 Activities of coke ovens.
Carbon dioxide
2. Production and processing of ferrous metals

2.1 Activities of metal ore (including sulphide ore) roasting and sintering
installations.
Carbon dioxide
2.2 Activities of installations for the production of pig iron or steel (primary
or secondary fusion), including continuous casting, with a capacity of more
than 2.5 tonnes per hour.
Carbon dioxide
CO2 emissions from sector

Total CO2 emissions from the three integrated I&S sites in recent years are presented in Table
9.2.
Table 9.2
Total CO2 emissions from the integrated I&S sites
Total emissions (tCO 2)

2000
2001
2002
2003
16,873,543
17,650,852
16,425,409
19,448,094
UK NAP Approved May 2005
The different process units each release very different amounts of CO2 with the greatest
proportion of the release being found in the main iron and steel manufacturing activities in the
sinter plants, blast furnaces and BOS furnaces. The average quantities for individual processes
are presented in Table 9.3 below. In addition to the metal making processes there are also
additional boilers and electrical generation units on the sites.
April 2006
Table 9.3
Average Emissions from the Individual Process Units at the UKs Three Integrated
Sites
Site
Data
range
Coke Ovens
2002 -05
Sinter Plants
2002 -05
Basic Iron Blast Furnaces
2002 -05
BOS Furnaces
Port Talbot
Scunthorpe
Teesside
Average Emissions
Average Emissions
Average Emissions
t CO 2 / year
t CO 2 / year
t CO 2 / year
2005
Continuous Casting Plant
2002 -05
Hot Wide Strip Mills
2002-04
Annealing Line
2002-04
Billet Mills
2002-04
Reversing Mills
2002-04
Medium Section Mills
2002-04
Heavy Section Mills
2002-04
Bar Mills
2002-04
Section Mill
2002-04
Confidential Data
Identification of Non-benchmarked incumbents, Benchmarked incumbents and New

Entrants
Non-benchmarked Incumbents
The three installations covered by Phase 1 of the EU ETS were given allocations based upon the
assessment of their historical emissions over the years 1998 2003. This approach, often called
grandfathering, is not dependent upon any performance benchmark. The incumbents in the
UK integrated I&S sub-sector that have received this type of allocation in Phase 1 are listed in
Table 9.4 below.
April 2006
Table 9.4
Company
Corus UK Ltd
Non-benchmarked Incumbents
Plant
NAP
ID
Production 1
Capacity2
Allocation3
mtpa
mtpa
t CO 2
Scunthorpe
Integrated Iron &
Steel Works
3.8
4.5
6,898,375
Port Talbot
Steelworks
33
3.6
3.8
6,320,259
Teesside Integrated
Iron & Steel Works
2265
3.3
3.9
6,306,630
1 Production figures for 2004, source Corus Company Profile, November 2005
2 Capacity defined as maximum possible annual production.
3 Source UK NAP (Approved May 2005)
4 mtpa = million tonnes per annum
Benchmarked Incumbents
There are no integrated I&S sites or individual units upon those sites that are benchmarked
incumbents in Phase 1.
New Entrants in Phase 1
Expected new entrants from the integrated I&S sub-sector to EU-ETS during Phase 1 of the
scheme are9 :
Scunthorpe Steel Works, extension to capacity by the modification of several different

processes.
Port Talbot Steel Works, extension to capacity by the modification of several different
processes.
9.2.2 Possible new entrant technologies in Phase II

The UK steel sector is currently in the process of making major capital investment in order to
restructure the production facilities. The information currently available on possible Phase 2 NE
obtained from a data trawl exercise conducted by DEFRA is shown in Table 9.5 below. (There
is likely to be a degree of overlap between Phase 1 and Phase 2 developments).
April 2006
Table 9.5
Possible New Entrants in Phase 2
Sector
Total
Annual
allowance
Installation
Name
Planned Date
Details
t CO 2 /y
Integrated Steel
Plant
501,000
Scunthorpe
Integrated Iron
and Steel Works
01/01/2008
Integrated steel - 300 000 t/year
Integrated Steel,
Lime Production,
Coke Ovens
1,133,497
Port Talbot
Steelworks
01/10/2008
Coke oven - 750000t/yr

Integrated Steel - 550000t/yr
Lime production - 300 t/day
Integrated Steel
Plant
1,419,500
Teesside
Integrated Iron
and Steel Works
01/01/2008
Integrated steel - 850 000 t/year
An important issue to consider for Phase 2 NE is the type of technology that will be used. The
potential for significant technology change in the integrated steel sub-sector is limited due to the
high cost of the existing asset base. There will be new technologies employed by new entrants
but this is likely to be either standalone technology in a process sub unit or marginal and
incremental improvements on specific process units and operations. The summary of possible
types of NE and the associated technologies are presented in Table 9.6.
Table 9.6
Summary of possible types of New Entrants in Phase II
Type of New Entrant
Technology
type
Fuel type
Examples
(known or
likely)
Other relevant
details
New installation
NA
NA
None
NA
New piece of equipment

to increase capacity at
existing installation
Unknown
Coke and fuel

gases
Port Talbot Coke

Oven
Not known
Extension to existing
piece of equipment to
increase capacity at
existing installation
Unknown
Coke and fuel

gases
Scunthorpe , Port
Talbot and
Teesside Steel
Works
Not known
The potential growth rates for the whole iron and steel sector were investigated by the DTI as
part of the research work on the energy and emissions projections for Phase 2 10 . The baseline
April 2006
10
growth rate for the iron and steel sector (including castings) is -0.8% for 2000 -05 and -0.2% for
2005 10. This supports that observation that the main focus on the integrated site will be
restructuring.
The potential for growth in the sector is also reflected in the climate change agreement targets
(CCA) 11 shown in Table 9.7 below. The original targets were revised in 2004 to allow for an
increase in energy use due to the recovery of the steel industry from its low production period in
2002. There are no specific production forecasts associated with these figures that are publicly
available.
Table 9.7
UKSEL CCA Targets
Target period
1st January 2002 to 31st December 2002
Original Target (PJ)
Revised Target (PJ)
388.3
NA
st
st
376.6
326.5
st
st
1 January 2006 to 31 December 2006
368.8
365.9
1st January 2008 to 31 st December 2008
365.0
370
1st January 2010 to 31 st December 2010
360.8
370
1 January 2004 to 31 December 2004
The targets were revised in 2004

PJ = peta joule where peta is 10 15
9.3
Review of Relevant Data
9.3.1 Data sources

Corus UK
Entec and Corus held detailed discussion on the data that are required in order to develop a
robust and transparent allocation mechanism for new entrants in Phase 2. However, Corus has
previously declared this to be confidential. A significant amount of this data has been published
in the public domain by AEA Technology 12 .
The Environment Agency
Entec has received copies or partial copies of the PPC application documents for each of the
three integrated sites and copies of the supporting information for the Phase 1 NE application
for Scunthorpe and Port Talbot.
DTI
Entec have held discussions with the DTI sector expert for the iron and steel industry.
9.3.2 Data from literature
Data from the literature on the specific energy consumption and emission factors for various
plants is summarised in Table 9.8.
April 2006
11
Table 9.8
Data from literature searches and other sources
Reports /
contacts /
information
sources
Plant
Details
Country
Technology type(s)
Year
Energy Consumption
Values
Industrial
Energy
Efficiency in
the Climate
Change
Debate13
Theoretical
plant
Global
Pig iron production in blast furnace
19951996
14.89 GJ / tonne iron
Slab production by Basic Oxygen

Furnace route (called BOS in UK)
19951996
-0.57 GJ / tonne crude steel
Production of shaped steel by hot rolling
19951996
1.53 GJ / tonne shaped steel
Production of shaped steel by cold

rolling
19951996
1.10 GJ / tonne shaped steel
Brazil
Production of crude steel
1995
23.3 GJP / tonne crude steel
China
1995
India
1995
Mexico
1995
South
Korea
1995
USA
1995
Worldwide
Production of primary steel
1990
24 GJP / tonne crude steel
Production of coke
1990
11.8 GJP / tonne coke
Production of sinter
1990
2.5 GJP / tonne sinter
1990
11.8 GJP / tonne iron
Production of crude steel by Basic

Oxygen Furnace (called BOS in UK)
1990
0.3 GJP / tonne iron
Production of sinter
1996
0.190 0.220 t CO2 / t

sinter
Production of coke
1996
0.520 t CO2 / t coke
1996
0.298 0.53200 t CO2 / t

iron
Production of crude steel by Basic

Oxygen Furnace (called BOS in UK)
1996
0.011 0.140 t CO2 / t liquid

steel
National
Average
Future
Technologies
for Energy
Efficient Iron
and Steel
Making14
Sector
Guidance
Note
Average
Benchmark
EU MS
(selected
plants)
April 2006
12
Reports /
contacts /
information
sources
Plant
Details
Country
Technology type(s)
Year
Energy Consumption
Values
GJ = Energy from use of fuel

GJP = Energy from uses of fuel and electricity ( on a primary basis)
The metrics of tones of liquid steel and tones of crude steel have been confirmed as being compatible by one of the authors of
reference 12
The performance of the UKs three integrated sites in 2004 was approximately 23.3 GJ P / tonne
of liquid steel or 19.3 GJ / tonne of liquid steel. The metrics of energy are expressed in two
different forms, one for direct fuel energy used in the production and the other for all the energy
used in production including electricity. The metric that includes electricity expresses the
energy contribution from this in a primary form. The primary measure of electricity is the
amount of energy used to generate it and can be several times greater than the actual electricity
metered at the point of use. It is difficult to compare the two energy metrics as the amount of
electricity and fuel used in steel production differs greatly in different countries. The
relationship between the primary measure of electricity and the metered measure also varies
between countries as does the carbon intensity of the electricity.
9.3.3 Benchmarks used in other contexts, including other Member States

Investigations have been undertaken to try to identify benchmarking approaches for new
entrants in other Member States. Overall, the extent of information available within the tight
timescales of this study has been limited. Furthermore, information will tend to relate to Phase I
approaches, and hence may not be indicative of approaches in Phase II, which this study is
focussed on. Notwithstanding this, it is useful to consider these approaches, as briefly
summarised below.
Denmark
The Danish NAP assumes an efficiency factor of 0.9 for new entrants but no distinction is made
between sectors for this factor. No discussion of new entrant benchmarks or formula.
Germany
New entrants are granted allocation on BAT benchmarks. These benchmarks are established for
installations with comparable products, and derived from BAT for new installations in that
class. Also, each product category will have a benchmark. New entrants that dont have defined
benchmarks will be granted allowance based on BAT.
New entrant formula (industry non-specific);
Allocation i = Ci U iP BAT,
where
i
is an index for the installation;
April 2006
13
Ci
is the installation-specific output capacity in MW;
U iP
is the projected utilisation or load factor by installation; and
BAT
BAT benchmark for emissions per output unit. There is no reported value for
steel produced by the BF BOS route.
Greece
Known new entrant allocation for specific sectors including steelworks.
Ai = Pi x Hi x 3.6 x 10-3 x BAi x EFj x CFi
where
Ai = annual installation-i allowances (t CO2/year);
Pi = new entrants installations-i power (MW);
Hi = installations-i hours of operation (h/year);
BAi = installations-i efficiency ration;
CFi = installations-i compliance factor (compliance factor less than or equal to 1).
Netherlands
Ai = Ev P C
Where
Ai = Allocation (tCO2 /year);
Ev = Emissions from combustion averaged for 2001 to 2002 (tCO2 /year), information
not readily available on the specific approach for new entrants operational after that
time;
P = Production growth as a factor for the total of the years 2003-2006 (relative index);
= energy consumption of the worlds best divided by the installations actual energy
consumption in the benchmark year 1999 (relative index);
C = Allocation factor (relative index).
Sweden
Allocation05-07 = k x Projected output05-07 x BM / BAT
Where
k = Scale factor applied to fuel-related emissions from combustion installations in the
energy sector. For non energy sector sites, k = 1.0;
Projected output05-07 = emissions in accordance with projected produced quantity of
installation-specific product 2005-2007. Only production based on fossil fuels is meant
for electricity and heat production;
April 2006
14
BM = Benchmark emission factor;

BAT = Corresponds to estimated specific emissions at installation (tCO2 /t product).
Other Member States
For a number of other Member States, the readily available information simply indicates that
new entrant allocations are to be based on BAT levels of performance. This applies to Czech
Republic, Ireland, Malta, Portugal (explicitly stating BAT Reference Documents), Slovenia
(also referencing BAT Reference Documents), and Spain.
9.4
Review of Phase I Benchmarks
9.4.1 Characterisation of existing New Entrant allocation benchmarks

The Phase 1 NE spreadsheet contains a number of input and calculation steps that allow
applicants to the NER to calculate the number of allowances they can claim as part of the
overall application process. The section of the Phase 1 NE spreadsheet that has been designed
to calculate allocations to new entrants in the integrated iron and steel sub-sector only covers
blast furnaces with no provision for any of the other processes that are found at an integrated
works. (Coke ovens are covered in a separate section under energy activities). The calculation
makes use of a benchmark emission factor of 1.67 t CO2 / t liquid steel produced. It should be
noted that this factor covers the whole steel making process (excluding coke ovens). In order to
apply the method a nominal figure for the annual capacity for the blast furnace is required.
There is no provision for any other type of process.
April 2006
15
The allocation amount, A, for a year in t CO 2 is given by the generic formula*:

A
EF
Allocation
Annual Production
Emissions Factor
tCO2
Tonnes of liquid steel / year
tCO2 / tonne liquid steel
For a full derivation of these please refer to the Phase 1 NE Spreadsheet.
Where the annual production is defined by:

P
Annual
Production
Nominal
capacity of
blast furnace
Operating
period
Utilisation
during
months
Tonnes of
liquid steel /
year
Tonnes
Months
Where:
Parameter / Variable
Value
Nominal capacity of the blast furnace, tonnes.
Operating period, months.
Utilisation, 100 %
EF
1.67 tCO2/ t liquid steel
It is not clear how this methodology has been applied in the case of the two Phase 1 NEs. The
information received by Entec suggests that the extension to capacity at one of the sites does not
involve a blast furnace unit.
The Phase 1 NE allocation for coke ovens is set out in a very similar format to that for the
integrated steel works. There are two separate calculations specified, one for coke ovens and
one for coke ovens with heat recovery and power generation 1 (Sun coke).
EU Emissions Trading Scheme Calculating the Free Allocation for New Entrants. Additional
Methodologies Report, February 2005, Http://Www.Dti.Gov.Uk/Energy/Sepn/New_Technologies.Pdf
April 2006
16
For both type of coke ovens the allocation amount, A, for a year in t CO 2 is given by:
A
EF
Allocation
Annual Production
Emissions Factor
tCO2
Tonnes of coke / year
tCO2 / tonnes coke
For a full derivation of these please refer to the Phase 1 NE Spreadsheet.

P
Annual
Production
Nominal
annual
capacity of
coke oven
Operating
period
Utilisation
during
operating
months
Tonnes of coke
/ year
Tonnes
Months
Where:
Value
Nominal annual capacity of the coke oven, tonnes.
Utilisation, 100% for coke ovens and 97% for coke

ovens with heat recovery and power generation (Sun
coke)
EFstandard
0.148 tCO2/ t coke
EFheat recovery
1.08 tCO2/ t coke for coke ovens with heat recovery and
power generation (Sun coke).
The elements in the Phase 1 NE spreadsheet are characterised in Table 9.9 below.
Table 9.9
Characterisation of the existing New Entrant allocation spreadsheet
Item
Parameter value / details
Coverage of activities (how

does the coverage of activities
included in the spreadsheet
compare to the activities in
the sector that are covered by
EU ETS)
Covers the activities as specified in the

directive. (This may be expanded in
Phase 2)
Level of sector differentiation

(Is there one set of formulae /
parameter values for the
whole sector, or are there
separate formulae / parameter
values for different
technologies, fuels, products
etc)
I&S: A single formula is used for the

whole integrated site.
Coke: A single formula is used for
coke ovens.
Justification for choice of

parameter value / details
given by FES
Source
of data
I&S: The attempt to

differentiate by process
produces potentially significant
under allocation at some sites,
according to FES.
12
Coke: Operations are

sufficiently uniform to allow for
single emission factor.
Separate emission factor
required for coke oven with
energy recovery.
April 2006
17
Item
Parameter value / details
Justification for choice of

parameter value / details
given by FES
Source
of data
energy recovery.
Degree of standardisation of
formulae (i.e. what types of
input parameters are required
in the formulae?)
Standard formula requiring two input

parameters.
The main elements have

been justified by FES analysis
of the industry
12
Technology / process types

(What types of technologies /
processes are used as the
basis for the parameter
values?)
I&S: The combined technology mix of

the UKs three integrated sites.
Primarily production of steel by the BF
BOS route.
Coke: The performance of the existing
coke ovens in the sector (mean age
approximately 20 years).
The main elements have been

justified by FES analysis of
the industry.
12
Sun Coke: Coke oven with energy

recovery.
Fuels assumed (What types
of fuels are used as the basis
for the parameter values?)
I&S: Complex mix of fuels as used at

three integrated sites.
Coke and Sun Coke: Coking coal
The main elements have been

justified by FES analysis of
the industry.
12
Emission factors (What are

the fuel CO 2 and Process CO 2
emission factors?)
I&S: Standard production based

emission factor. Fuel and process gas
interlinked. Average emissions from
the 3 UK integrated plants from 1998
to 2003, including blast furnaces, BOS
furnaces, sinter plant, and associated
boilers and power plant.
I&S and Coke: The analysis of

real energy data from the
three sites conducted by FES.
12
Sun Coke: No details as to

how the stated emission factor
has been derived.
Coke and Sun Coke: Separate

emission factors for two different
technologies. The standard emission
factor is based on average emissions
from UK coke ovens (except Port
Talbot) from 1998 to 2003. Port Talbot
process believed to be anomalous,
may be as a result of ammonia
incinerator that is used in association
with coke ovens.
Capacity utilisation factors /
load factors (What are the
values for these factors?)
I&S: User defined nominal capacity

and number of months of operation
per year. Standard utilisation factor
(set at 100%)
I&S and Coke: FES analysis of

the industry
12
Sun Coke: No details available
Coke: User defined nominal capacity

and number of months of operation
per year. Standard utilisation factor
(set at 100%).
Sun Coke: User defined nominal
annual capacity. Standard utilisation
factor (set at 97%).
9.4.2 Validation of existing New Entrant allocation spreadsheet

Table 9.10 compares the benchmarked allocation to the relevant emissions as listed in the UK
NAP. The relevant emissions are defined as being the average emissions of CO2 for the highest
five years out of six between 1998 and 2003. This was chosen as the basis for comparison
because the calculation of the indicative Phase 1 allocation has been carried out without the
subtraction for CHP reserve. The relevant emissions are therefore a more accurate comparison
to it than the NAP allocation itself, which has the sector NE contribution subtracted from it. .
April 2006
18
Table 9.10
Comparison of Allocations based upon the Phase1 NE Spreadsheet with UK NAP

Relevant Emissions
Reference
Ratio of Phase 1 NE / NAP Relevant Emissions
0.940
0.936
1.033
Overall the allocation under the NER benchmark (t CO2 / t l.s) is slightly lower than the figures
for the relevant emissions. This is to be expected, as the benchmark emission factor does not
include the production of coke and the relevant emissions exclude the lowest year from 1998 to
2003 whereas the benchmark is based on all years over that period. The additional allocation for
coke can be derived from the separate NE method.
Table 9.11
Comparison of Allocations based upon the Phase 1 NE Spreadsheet (I&S + C) with UK

NAP Relevant Emissions
Reference
Ratio of Phase 1 NE (I&S + C)/ NAP Relevant Emissions
0.983
0.968
1.050
The ratios show that the allocation under the full Phase 1 method is very close to the actual
relevant emissions.
9.5
Assessment of Phase I Benchmarks and Proposed

Revisions to these Benchmarks
A significant amount of work was done in the development of the UKs allocation methodology
for new entrants to Phase 12 . The work investigated whether an allocation could be based upon
the overall production of steel by means of a single emission factor. The factor originally
suggested by Corus, based upon 1998 to 2003 performance (minus lowest year), was 1.86 t
CO2 / t liquid steel, (this included coke production). The issue with the Corus metric is that the
production of coke can be carried out separately from the iron and steel process. Coke can be
made in advance and stockpiled or bought in from out side the installation. The uses of a
benchmark for the metric of total production in this way could lead to inconsistencies in the
allocation. Furthermore, it was considered that excluding the lowest year may not be consistent
with the approach adopted in other sectors.
CO2 Allocation Methodologies for New Entrants to the EU Emissions Trading Scheme in the Iron and
Steel Industry, August 2004, AEA Technology
April 2006
19
The UK NER method for allocation to the iron and steel industry uses a benchmark emission
factor of 1.67 t CO2 / t liquid steel produced. This factor covers the blast furnace, BOS furnace,
sinter plant, and associated boilers and power plant and excludes the coke ovens. However, in
line with our working assumptions for this study, the coverage in Phase 2 may be expanded for
integrated steelworks.
A reference specific energy figure has been developed for the production of iron and steel from
international benchmarking work by Phylipsen et al13 . The figure represents the lowest value
that could be achieved by utilising the best technology available. It does not represent an actual
operational plant. However the figure is expressed in terms of the production technology used
in different countries, such as the ratio of electric arc furnaces to open hearth furnaces or
whether direct reduction is used instead of a blast furnace, and is not a single metric. The
specific energy benchmark is converted into a production emission benchmark by the inclusion
of the country specific fuel mix. The value of this for Brazil for example is 0.98 t CO2 / t crude
steel whereas the figure for China is 1.67 t CO2 / t crude steel. (The data available in the UK is
expressed in terms of tonnes of liquid steel. It has been confirmed by Phylipsen that these
metrics are equivalent).
The main restriction of the Phase 1 NE benchmark is that it cannot be used to make allocations
under a direct approach as it is based upon total emission from the integrated process. The main
focus of this study has been to develop benchmarks that can be used in a direct approach.
9.5.1 Allocation Methodology based upon Direct Approach
A set of emission benchmarks have been developed that are based upon the emissions from each
stage of the production of steel at an integrated site.
The allocation value for any specific process , As, for a year in t CO2 is given by:
As
EFs
Allocation
Annual production for process

S
Emissions factor for

process S
tCO2
Tonnes of product S / year
tCO2 / tonne product S

Ps
Cs
LFs
Annual
Production
Design
capacity of
process S
Load Factor
of process S
Tonnes of
product S /
year
Tonnes
Where:
April 2006
20
Value
Design capacity of process S, tonnes
LFs
Load factor of process S, %.
Ps
Production for the process; coke, sinter, iron, steel etc.

tonnes / year
EFs
Emission factor for the process, coke, sinter, blast

furnace, BOS etc, t CO2 / t product
The allocation methodology has been developed for the stated operations at the three integrated
sites using data from Corus and the Phase 1 NE research report for the sector 12 . The overall
allocation formula requires the use of two standard factors for each of the process stages, the
emission factor and the load factor. Each of these is discussed below.
9.5.2 Determination of Emission Factors
There are a number of approaches that could be used to derive emission factors for the
individual stages in an integrated iron and steel site. Two of these have been considered by
Entec:
the first is to calculate an emission factor per unit of product based upon the fossil fuel/
feedstock input into the process;
the second is to derive an emission factor per unit of product based upon the direct
emission of CO2 from the process.
Emission Factor based on Fuel Input

The first approach has been considered by Entec in a previous project that examined the
feasibility of benchmarks 15 . A set of approximate values based upon a single year of operation
at a single UK site has been derived to serve as an illustration. These are shown in Table 9.12
below.
Table 9.12
Emission Factors based upon Fuel Input.
Product
Emission Factor
Unit
SEC
Unit
Coke
0.284
t CO2 / t coke
2.95
GJ / t coke
Sinter
0.157
t CO2 / t sinter
1.64
GJ / t sinter
Blast Furnace
1.41
t CO2/ t iron
14.7
GJ / t iron
BOS
0.136
t CO2 / t steel
1.44
GJ / t steel
SEC based upon coking coal, emission factor 94.6 t CO2 / PJ (NCV)
April 2006
21
For the purposes of comparison with existing benchmark metrics these emission factors can be
converted into an approximate SEC figure through the use of a carbon intensity factor for the
fuel used. In this example the carbon intensity factor for coking coal (the main fuel in the UK
steel industry) has been used. This gives SEC values that are not unlike those quoted for best
practice in Table 9.8.
The difficulty with this approach is that it starts with a basic assumption that all the fossil fuel /
feedstock would be oxidised to produce CO2 emissions within the specific process. However, in
an integrated steel works this is not the case. The process offgas from certain processes still has
significant calorific value and consequently is used as a fuel in a number of the other stages.
This has implications for the NE allocation methodology for Phase 2. According to the criteria
used to define the direct approach to Phase 2 NE any increase in emissions from combustion of
this fuel gas in an existing process that does not have increased capacity should not receive an
additiona l allocation as it does not constitute a physical change.
There is also an additional difficulty with this approach as it is unable to account for emissions
of CO2 from the limestone and dolomite used in the sinter plants and BOS furnaces. These
would need to be included as separate inputs with separate emission factors.
Emission Factor based upon CO 2 Released
The second approach is to use the actual direct emissions of CO2 (from fuel and feedstock) that
arise at the individual processes to derive the emission factor. This would be an emission based
benchmark rather than an energy based benchmark and would include the emissions of CO2 that
originate from the use of limestone and dolomite. This has the advantage that it more
realistically accounts for the use of intermediate fuel gas but it is sensitive to the exact way in
which the gas is used at any one site, (particularly with regard to the generation of electricity
and steam). Sites that make extensive use of the intermediate gas from a process to fuel boilers
and to generate electricity will have a lower direct emission factor from that process than a site
that flares the gas.
The offgas plumbing of the three UK sites is different and this could cause difficulties as the
following example shows: Process X at site A runs on 50 % natural gas (56.1 t CO2 / PJ (NCV))
16
and 50 % coke oven gas (108.2 t CO2 / PJ (NCV)); Process X at site B runs on 100% natural
gas. An emission factor based upon an average of these two sites would over allocate to site B
by approximately 19% and under allocate to site A by approximately 19% (assuming similar
production). Furthermore any development of new additional capacity at the sites may have the
effect of altering the established pattern of use.
The values for the emission factors for each process stage have been calculated through the use
of performance data from 2002 to 2005. The UK steel sector recently embarked upon a
programme of major capital investment and that this may have changed the performance data
for 2005. After discussions with Corus it was decided to include the 2005 figures in the
analysis but to show then separately (Emission figures for the downstream rolling mills for 2005
were not received from Corus). The results have been presented as averages weighted by
production so as to account for any site by site variation based on data sets for 2002 2004 and
2002 2005. These are presented in the tables below on a process and site specific basis. The
level of variation in the process specific emission factors across the different sites is an
important consideration and this is discussed below.
April 2006
22
Table 9.13
Emission Factors for Processes at Port Talbot
Port Talbot
Product
2002
2003
2004
t CO 2 / t
product
t CO 2 / t
product
t CO 2 / t
product
Weighted
Mean 2002
- 2004
t CO 2 / t
product
t CO 2 / t
product
Coke Ovens
Coke
Sinter Plants ( including

reverts)
Sinter
Basic Iron Blast

Furnaces
Iron
BOS Furnaces
Liquid
steel
Continuous Casting
Plant
Secondary
steel
Secondary
steel
Pickle Line
Secondary
steel
Five Stand Mill
Secondary
steel
Annealing Line
Secondary
steel
2005
Weighted
Mean
2002 2005
t CO 2 / t
product
Confidential data
The emission factors for the different processes at the Port Talbot site demonstrate a good
degree of consistency across the years 2002 2005 for the coke ovens, sinter plant and blast
furnace.
The emission factors for the mills and downstream process were calculated from 2002 2004
data only. These also show a good degree of consistency.
April 2006
23
Table 9.14
Emission Factors for Processes at Scunthorpe
Scunthorpe
Product
2002
2003
2004
t CO 2 / t
product
t CO 2 / t
product
t CO 2 / t
product
Weighted
Mean
2002 2004
t CO 2 / t
product
Appleby Coke Ovens
Coke
Dawes Lane Coke Ovens
Coke

reverts)
Sinter
Iron
BOS Furnaces
Liquid
steel
Secondary
steel
Billet Mills
Secondary
steel
Reversing Mills
Secondary
steel
Secondary
steel
Heavy Section Mills
Secondary
steel
Bar Mills
Secondary
steel
2005
t CO 2 / t
product
Weighted
Mean
2002 2005
t CO 2 / t
product
Confidential data
The emission factors for the different processes at the Scunthorpe site demonstrate a good
degree of consistency across the years 2002 2005 for the coke ovens and blast furnace. The
emission factors for the mills and downstream process were calculated from 2002 2004 data
only. These show a good degree of consistency.
April 2006
24
Table 9.15
Emission Factors for Processes at Teesside
Teesside
Product
2002
2003
2004
t CO 2 / t
product
t CO 2 / t
product
t CO 2 / t
product
Weighted
Mean
2002 2004
t CO 2 / t
product
Redcar Coke Ovens
Coke
S. Bank Coke Ovens
Coke

reverts)
Sinter
Iron
BOS Furnaces
Liquid
steel
Secondary
steel
Billet Mills
Secondary
steel
Section Mills
Secondary
steel
2005
t CO 2 / t
product
Weighted
Mean
2002 2005
t CO 2 / t
product
Confidential data
The emission factors for the different processes at the Teesside site demonstrate a good degree
of consistency across the years 2002 2005 for the coke ovens and blast furnace. The emission
factors for the mills and downstream process were calculated from 2002 2004 data only.
Those for the continuous casting plant and the section mills show a good degree of consistency.
An examination of the emission factors derived for each process at each of the three sites shows
that for most processes, particularly those with the highest emission factors, there is good
consistency across the years. The datasets have been combined to produce a weighted average
which is then tabulated by process type in Table 9.16 below.
April 2006
25
Table 9.16
Emission Factors by Process
Site
Data range
for weighted
mean
Port Talbot
Scunthorpe
Teesside
Weighted Mean
Weighted Mean
Weighted Mean
t CO 2 / t product
t CO 2 / t product
t CO 2 / t product
Coke Ovens
Sinter Plants
BOS Furnaces
Annealing Line
Confidential data
Billet Mills
Reversing Mills
Heavy Section Mills
Bar Mills
Section Mill
It is not proposed to combine the emission factors any further as an average value would not
necessarily be meaningful. The selection of the most appropriate emission factor for the Phase 2
NE spreadsheet is discussed below.
Coke Ovens
An emission factor for coke ovens has already been derived for the Phase 1 NE spreadsheet.
These are 0.148 tCO2 / t coke for a standard oven and 1.08 tCO2 / t coke for coke ovens with heat
recovery and power generation (Sun coke). It is proposed to retain the 0.148 figure for a
standard coke oven as it approximately equals the lowest emission factor from the above table.
The emission factor for the Sun coke process was developed in order to account for a coke
production technology where the coke oven gas was used to generate power at the coking site
rather than being used in the integrated site. This is for standalone coke works rather than those
owned and operated by Corus. It could be argued that there should only be a single emission
factor based upon best practice for the production of coke (by whatever means ) but more details
would be required of the type of energy recovery technology involved in a Sun coke oven in
order to make a further assessment.
April 2006
26
Sinter Plants
It is proposed that the emission factor of [Confidential Data] tCO2 / t sinter be used as the
benchmark value as this represents the lowest emission factor from the available data in the UK.
The emission factor for sinter stated in Table 9.8, derived from the BREF note shows a lower
range of values, 0.190 220 t CO2 t sinter, than has been observed at UK plants. However, in
the original values in the reference are expressed in t CO2 / t liquid steel and have been
converted to t CO2 / t sinter through the use of two standard conversion factors that are also
specified in the BREF Note. Because of these conversion factors Entec is not clear that the
emission factor for the sinter is a realistic statement of best practice.
The proposed emission factor for the sinter plant includes the emissions of CO2 from limestone.
Blast Furnaces and BOS Furnaces
The selection of an emission factor for the blast furnace and BOS process is more difficult as
the emission from these processes are determined by the extent to which the offgases are
exported to other processes. This use varies site to site. The difference seen in the emission
values between the sites in the BOS process is at least partially due to the fact that Scunthorpe
uses BOS gas as a fuel whereas the two other sites do not. However, it is proposed that on the
basis of currently available information the best practice benchmarks in the Phase 2 NE
spreadsheet should be: [Confidential Data] tCO2 / t liquid steel for a BOS furnace (this includes
emission of CO2 from dolomite) and [Confidential Data] tCO2 / t iron for a blast furnace.
Downstream Mills
The emission factors for the downstream mills are determined by the type of products that they
make and by the extent to which they are fuelled by the off gasses of the upstream processes.
The proposed emission factors for the different types of mills (linked to product) are as shown
in Table 9.17 below.
Table 9.17
Proposed Emission Factors for Downstream Processes.
Process
Proposed Emission Factor
t CO 2 / t product
Annealing Line
Billet Mills
Reversing Mills
Confidential data

Heavy Section Mills
Bar Mills
Section Mill
April 2006
27
9.5.3 Determination of Load Factor and Capacity

The allocation formula requires that a load factor be used to adjust the capacity of the process
unit. Some discussion of issues to do with capacity is given earlier in this section. The
difficulty in defining the capacity of existing units in an integrated works leads to an equal
difficulty in defining load factors as the two parameters are directly linked. Capacity data for
the upstream processes has been taken from the PPC Process Guidance note. This is regarded
by Entec as being design capacity.
There is no published data available for the downstream processes and values for these have
been estimated..
The values for the load factors for each process stage have been calculated through the use of
performance data from 2002 to 2005. The results have been presented as averages weighted by
production so as to account for any site by site variation based on data sets for 2002 2004 and
2002 2005. These are presented in the tables below on a process and site specific basis. The
level of variation in the process specific load factors across the different sites is an important
consideration and this is discussed below.
Table 9.18
Load Factors for Processes at Port Talbot
Port Talbot
Product
2002
2003
2004
Weighted
Mean 2002
- 2004
2005
Weighted
Mean
2002 2005
%
%
Coke Ovens
Coke
Sinter Plants
Sinter
Iron
BOS Furnaces
Liquid
steel
Secondary
steel
Hot Wide Strip Mills (HSM)
Secondary
steel
Pickle Line
Secondary
steel
Five Stand Mill
Secondary
steel
Annealing Line
Secondary
steel
Confidential data
April 2006
28
Table 9.19
Load Factors for Processes at Scunthorpe
Scunthorpe
Product
2002
2003
2004
Weighted
Mean
2002 2004
2005
%
Appleby Coke Ovens
Coke
Coke
Sinter Plants
Sinter
Iron
BOS Furnaces
Liquid
steel
Secondary
steel
Billet Mills
Secondary
steel
Reversing Mills
Secondary
steel
Secondary
steel
Heavy Section Mills
Secondary
steel
Bar Mills
Secondary
steel
Table 9.20
Weighted
Mean
2002 2005
Confidential data
Load Factors for Processes at Teesside
Teesside
Product
2002
2003
2004
Weighted
Mean
2002
2004
%
Redcar Coke Ovens
Coke
S. Bank Coke Ovens
Coke
Sinter Plants
Sinter
Iron
BOS Furnaces
Liquid
steel
Secondary
steel
2005
Weighted
Mean
2002
2005
%
Confidential data
April 2006
29
Teesside
Product
2002
2003
2004
Weighted
Mean
2002
2004
2005
Weighted
Mean
2002
2005
Billet Mills
Secondary
steel
Section Mills
Secondary
steel
An examination of the load factors derived for each process at each of the three sites using data
from 2002 2005 reveals that for most processes, particularly those with the highest emission
factors, there is good consistency across the years. The site datasets have been combined to
produce a weighted average which is then tabulated by process type in Table 9.21 below.
Table 9.21
Load Factors by Process
Site
Data
range for
weighted
mean
Port Talbot
Scunthorpe
Teesside
Weighted Mean
Weighted Mean
Weighted Mean
Coke Ovens
2002 -05
Sinter Plants
2002 -05
2002 -05
BOS Furnaces
2002 -05
2002 -05
2002 -05
Annealing Line
2002 -05
Billet Mills
2002 -05
Reversing Mills
2002 -05
2002 -05
Heavy Section Mills
2002 -04
Bar Mills
2002 -05
Section Mill
2002 -05
Whole Site (unweighted

average)
2002 -05
Confidential data
UK (unweighted average)
2002 -05
Confidential data
Confidential data
The load factors for three sites and the UK as a whole have been included as unweighted averages. This is
for illustration purposes. A value expressed as a weighted average, based upon the load factors of
interconnected capacities of the different production units at the sites, can be derived but is not expected to
be significantly different from the unweighted value.
April 2006
30
The examination of the values derived for load factors on a process by process basis reveals that
although there is some degree of variation site to site the average values expressed on a whole
site basis demonstrate a degree of consistency. The principle weakness of the development of
the process based load factors is the difficulty in assigning true production capacities. One
way to determine capacity may be to compare the current level of production against the recent
highest level of production.
The data for the annual production of crude steel by the BF BOS route for the years 1996 - 2004
are presented in Table 9.22 . A load factor based upon on the capacity being defined by the
actual production in 2000 (the highest figure in recent years) has been calculated for each year.
The combined weighted average for the years 2000 2005 is [Confidential Data]%. After
removing the 2002 data (reduced production was due to the problems at Port Talbot) the
weighted average value for 2000 2005 is [Confidential Data]%. These values are close to the
overall UK value of [Confidential Data]% derived from the process by process approach
discussed above.
Table 9.22
Load Factor based on UK Crude Steel Production (Oxygen Process)
Crude Steel, Oxygen

process kt
Year
LF based on 2000 production

defining capacity
2005
Confidential data
Confidential data
2004
10,667
92%
2003
10,629
92%
2002
8,956
78%
2001
10,270
89%
2000
11,550
100%
1999
12,633
109%
1998
13,426
116%
1997
13,986
121%
1996
13,758
119%
Crude Steel, Production of Oxygen Steel, Table 11, Annual Statistics for the
United Kingdom, 2004, ISSB
Oxygen processes means the production of steel by the BF- BOS route
It is proposed that the Phase 2 NE spreadsheet use a standard load factor value of 90% for all
processes.
Summary
The following table briefly considers the key elements of the existing NE allocation spreadsheet
and summarises details of proposed revisions. The proposals are then justified against the
agreed evaluation criteria in the following section.
April 2006
31
Table 9.23
Summary assessment of key elements of existing New Entrant allocation spreadsheet

and proposals for potential revision
Tests to be applied to
existing NE allocation
spreadsheet
Answer / Details of proposed revision
Differentiation: should there be

less or more differentiation
within the sector (i.e.
differentiating based on subproduct, raw materials,
technology, fuel, efficiency etc)?
If so, what should it be?
Greater differentiation is proposed by moving from an

integrated approach to a direct approach based upon
individual process operations. However, for each process
operation there is no differentiation.
Level at
which
benchmark
is set
Is the emission
factor
consistent with
sector best
practice3? If
No, what
should it be?
The emission factors for each process operation in the NE

spreadsheet are based on the best observed performance at
the three UK sites considering the most recent years of data.
Is the load
factor realistic
for new entrants
in that sector? If
No, what
should it be?
It is suggested that the parameter of design capacity should be

retained and combined with a standard load factor for the UK.
The load factor is realistic for new entrants.
Source of
data
Confidential
data
Confidential
data
Confidential
data
9.6 Evaluation of Proposed Benchmarks

Feasibility
The proposed approach is simple and transparent. The standardised factors are based upon
actual recent performance data for the UK integrated steelworks, the most recent data of
which has been audited under the EU ETS system.
The only input parameter to be entered by the operator is design capacity. For either an
extension to existing equipment or for new equipment, this parameter should be verifiable
by reference to design documentation.
The benchmark emission factors for each separate process operation are based on the lowest
actual emission factor for that operation considering the three UK integrated steelworks.
This is considered to be a reasonable approximation of best operating practice (in the UK),
taking into account the character of the existing integrated steelworks in the UK and the fact
that BAT takes into account installation-specific technical considerations. Overall, a high
priority for a long time for any installation in this sector is the reduction of fuel and energy
costs. As such, there may be limited scope for additional CO2 emissions reductions beyond
those measures that are already implemented. In this sector, basing BAT based emission
factors on performance of other (overseas) existing plants could be problematic due to
Interpreted as Best Available Techniques (BAT), as defined in the IPPC Directive. In practice, within
the scope of this study it will only be possible to assess this in broad indicative terms at a sectoral level. It
is clearly not within our scope to define BAT at the level of detail that would be required for a site
specific PPC Permit.
April 2006
32
inherent differences in underlying process technologies; abatement potential; fuel types and
scale of operation.
Incentives for clean technology
In general there is always an incentive to apply the cleanest technology unless the
benchmark directly includes technology as a parameter. The proposed approach does not
contain technology (or fuel) as an operator choice. It therefore maintains the incentive to
apply the most energy efficient equipment and lowest emitting fuel.
The two different steel making routes, BF BOS and EAF (see EAF report) have different
emission factors for the production of the same type of steel. It could be argued that in order
to comply with best practice the lowest overall emission factor, regardless of route should
be applied in the Phase 2 NE allocation system. However, the products made by the two
routes in the UK are significantly different.
The different steel making routes are used to a different extent in different countries around
the world with the mix being determined by a wide range of economic factors such as
availability of scrap steel, the availability of coal and the type of downstream industry. This
makes it difficult to determine an EU or global best figure.
There is, however, one exception to this. For coke ovens two benchmarks are retained, as
for the Phase I benchmarks. These cover standard coke ovens and those with heat recovery
and power generation, namely the Sun coke process. This variant was introduced to account
for a coke production technology where the coke oven gas was used to generate power at
the coking site rather than being used in the integrated site.
Whilst there is differentiation into the various process operations (e.g. blast furnace, BOS
furnace, sinter plant, etc), this is considered justifiable as they make different (intermediate)
products. Furthermore, this is regarded as necessary feature of the benchmarks under a
direct emissions approach.
Competitiveness and impact on investment

The total impact of EU ETS on cost of steel production is about 25 to 30 per tonne of
steel equivalent to 10% of the steel price and in the same order of magnitude as the profit
per tonne of steel4 . Any shortfall in the free allocation could therefore have a large impact
on the profitability of new production capacity and therefore on the investment decisions.
The differentiation by process is motivated by the differences in products each process leads
to and the significant difference in the emission factors attached to each process. With an
allowance price of 17 per tonne of CO2 , the difference between the processes measured by
the value of the allowances allocated to each process would be at least 2-3 per tonne of
Assuming 1.67 t CO2 /t steel and CO2 price of 17 gives 28 per t steel. Steel prices fluctuate
significantly. Assuming a price range of $300 to $500 and a profit margin of 10% gives profit
per tonne in the range of approximately 18 to 30. See also, Rienaud (2005) Industrial
competitiveness under EU ETS by J. Rienaud, IEA Information Paper, 2005.
April 2006
33
steel. With a profit margin per tonne of steel around 25 this difference is in order of 10%.
This is so much that it could influence investment decision.
Competition effects with other EU steelworks will clearly be sensitive to the specific
implementation approaches being adopted by other MSs, i.e. whether they are opting for the
direct or integrated approach. It is not known at the time of writing which approaches
countries will opt for. On the assumption that most MSs will apply the direct approach the
main competition issue is towards non-EU competitors. However, if any MS would apply
the integrated approach it could influence decision on where to locate new capacity for any
company with such a choice.
Competition with non-EU states is important as the steel market is international. It has been
disputed whether it will be possible to pass-on any additional costs to the products, but the
opportunities seems limited due to the high degree of global competition. Therefore, UK
competitiveness with respect to investment decisions is likely to be affected if sites needs
are not more or less covered by the NE benchmark.
The level of emission factor at which the proposed Phase II benchmarks are set should
broadly correspond to achievable performance for best practice modifications to existing
equipment or new equipment, considering the UK integrated steelworks as a whole. In fact,
the emission factors are based on best current performance, which may result in providing
more than site needs where modifications to existing equipment or new equipment perform
better than best current practice, which may be realistic given the nature of technical
progress. As such, the level of the emission factor may be consistent with what the site
would need.
A key issue under a direct approach relates to which plant modifications and new equipment
would be deemed eligible for a new entrant allocation. According to the rules of the scheme
under a direct approach, an extension will only be eligible for allowances from the NER
where it involves a piece of equipment which directly produces emissions which must be
accounted for under the scheme the calculation of allowances to be allocated to an
eligible extension will be based on a direct emissions approach, i.e. the allocation will be
based on the benchmark associated with the piece of equipment that has been introduced or
extended. The exact interpretation of piece of equipment which directly produces
emissions therefore becomes important for this sector, for example in relation to potential
types of modifications that can be made to an existing blast furnace to increase its
processing capacity.
Furthermore, there is significant potential for modifications to one process operation to lead
to increased capacity utilisation at other process operations. For example, the addition of a
new ladle is likely to lead to higher utilisation of other components of the works (blast
furnace, casting, rolling, etc.); however, if there has been no expansion in capacity at these
operations then they will not qualify for allocations. The new entrant allocation would relate
only to the new ladle.
Therefore, whilst a modification to increase capacity that directly produces emissions

should broadly meet site needs providing it is consistent with best practice and load factors
are consistent with historical average, a modification to increase capacity that does not
directly produce emissions (but leads to increased emissions elsewhere) will not meet site
needs. Furthermore, site needs will not be met for any increases in capacity utilisation that
are not associated with modifications that are directly emitting.
April 2006
34
Consistency with incumbent allocations

The proposed Phase 2 benchmarks are based on actual emission factors for the lowest
emitting incumbent processes in the UK and the average load factor of incumbent processes
in the UK. As such, the proposed benchmarks should provide consistency with incumbent
allocations for sites operating at levels consistent with best current practice for existing
plants in the UK.
The proposed Phase 2NE spreadsheet has been used to calculate illustrative allocations for
each of the separate process at each of the three integrated sites. These are shown in the
tables below. As expected, the allocations derived for the processes are similar to the actual
emission from which they have been derived. The largest divergence is found at plants
where the actual emission factor was much higher that the lowest observed. The clearest
examples of this are the coke ovens and the BOS furnaces.
Table 9.24
Comparison of Process Specific Annual Average Emissions for 2002 -2005 with
proposed Phase 2 New Entrant allocation spreadsheet: Port Talbot
Port Talbot
Rated
design
capacity
2004
Proposed
Emission
Factor
Proposed
Load
Factor
Allocation
t CO2 /
year
Tonnes
product /
year
T CO2 / t
product
Average
Emissions
2002
2005
t CO 2
Coke Ovens
Sinter Plants
BOS Furnaces
Confidential data
Continuous Casting Plant*
Hot Wide Strip Mills*

Annealing Line*
April 2006
35
Table 9.25
proposed Phase 2 New Entrant allocation spreadsheet: Scunthorpe
Scunthorpe
Rated
design
capacity
2004
Tonnes
product /
year
Proposed
Emission
Factor
Proposed
Load
Factor
T CO2 / t
product
Allocation
t CO2 /
year
Average
Emissions
2002
2005
t CO 2
Appleby Coke Ovens

Sinter Plants
BOS Furnaces
Confidential data
Continuous Casting Plant*

Billet Mills*
Reversing Mills*
Medium Section Mills*
Heavy Section Mills
Bar Mills*
Table 9.26
proposed Phase 2 New Entrant allocation spreadsheet: Teesside
Teesside
Rated
design
capacity
2004
Tonnes
product /
year
Redcar Coke Ovens
Proposed
Emission
Factor
Proposed
Load Factor
Allocati
on
t CO2 /
year
T CO2 / t
product
Average
Emissions
2002
2005
t CO 2
Confidential data
S. Bank Coke Ovens

Sinter Plants
April 2006
36

BOS Furnaces
Billet Mills
Section Mills
It is possible to compare the allocation on a process by process level with the overall emission
from the sites as stated in the UK NAP. This is presented in Table 9.27 below. The comparison
between the average of the 2000 2003 emissions (with the lowest dropped) and the proposed
Phase 2 NE allocation reveals a significant difference for each site.
Table 9.27
Comparison of Overall Annual Average Emissions for 2000 -2003 (Lowest Dropped)
with proposed Phase 2 New Entrant allocation spreadsheet
Port Talbot
Scunthorpe
Teesside
Phase 2 NE Allocation: Iron and steel processes

Phase 2 NE Allocation : Boilers
Total
Confidential data
Annual Average Emissions 2000 - 2003 , Lowest Dropped

Ratio P2 NE / Average Emission
A key reason for the difference observed between the actual overall emissions and the proposed
Phase 2 NE derived figures is due to the fact that the emission factor that is applied to the
additional combustion units, fuelled by the offgas, is based upon natural gas. (Natural gas has a
lower emission factor than the fuel gases).
The Phase 2 methodology, designed to comply with the direct approach, does not provide
additional allocations for any increase in emission from the use of additional fuel gas that may
be produced as a result of an increase in production capacity, except where there are
corresponding increases in combustion capacity of this fuel gas.
The NE allocation process treats boilers and electricity generation separately and uses an
emission factor based upon natural gas.
The move from an integrated approach for the determination of allocations as used in Phase I to
a direct approach as proposed in Phase II may result in a significant reduction in the level of
allocations that would be received by the two Phase 1 New Entrants in the steel sector. This is
because under a direct approach, allocations are only given to extensions in capacity and not to
increases in utilisation of existing capacity, which is thought to be a significant element of the
expansion plans of the New Entrants.
April 2006
37
The potential impact of the proposed move can be understood by comparing the value of
emission factor under the integrated approach, 1.67 t CO2 / t steel, to the process specific
emission factors that are proposed for Phase 2 as shown above. If a new BOS furnace is taken
as an example then allocation that it would receive under the proposed Phase 2 system will be
approximately 5% of that which it could have received under the Phase 1 system. In the case of
an example blast furnace the proposed Phase 2 allocation would be 19% of that which would
have been received under the Phase 1 system. These examples illustrate the scale of the
potential problem.
9.7
References
EU Emissions Trading Scheme- Calculating the Free Allocation for New Entrants, DTI ,
November 2004
2
Best Available Techniques Reference Document on the Production of Iron and Steel,
December 2001, European Commission
3
Competitiveness, Trade and Regional Implications of the EU Emission Trading Scheme,

Energy Strategy Unit, DTI, January 2004
4
ISSB, Annual Statistics for the United Kingdom 2004
Greenhouse Gas Trading Scheme Regulations 2003 (SI 2003 No. 3311)
Overview of Methodology for Phase II Review of New Entrants' Benchmarks, NERA

Economic Consulting, 20th March 2006.
http://www.dti.gov.uk/energy/sepn/methodological_overview_phase2_benchmark_review.pdf
7
Guidance for the Production of Coke, Iron and Steel, Sector Guidance Note IPPC S2.01
The Greenhouse Gas Emissions Trading Scheme Regulations 2005, SI 2005 No 925
The NER Queue, Environment Agency February 2006
10
Industrial Growth Assumptions for Updated Energy and Emissions Projections Phase 2,
DTI
11
Umbrella
Climate
Change
Agreement
for
http://www.defra.gov.uk/environment/ccl/pdf/202uksa.pdf
the
Steel
Sector
at
12
CO2 Allocation Methodologies for New Entrants to the EU Emissions Trading Scheme in the
Iron and Steel Industry, August 2004, AEA Technology
13
Industrial energy efficiency in the climate change debate: comparing the US and major
developing countries, G.J,M. Phylipsen, K Block and J Bode, Energy for Sustainable
Development, Vol VI No. 4, December 2002.
14
Future Technologies for Energy Efficient Iron and Steel Making, J de Beer, E Worrell and K
Block, Annu.Rev. Energy Environ.1998.23:123 - 205
15
Potential benchmarks for EU ETS operators

http://www.dti.gov.uk/energy/sepn/euets_benchmarks.shtml
April 2006
38
16
Commission Decision of 29th January 2004 establishing guidelines for the monitoring and
reporting of greenhouse gas emissions pursuant to Directive 2003/87/EC of the European
Parliament and of the Council. Official Journal of the European Union (OJ) L 59, 26.2.2004
April 2006

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1

Iron and Steel - Integrated Steelworks

Process at an Integrated Steelworks

Note: Both upstream and

Cast Shapes (Billets,

Integrated vs. Direct Approach to Allocation

Phase I incumbent and new entrant installations

Identification of how sector is covered under EU ETS

Activities and Specified Emissions

1.3 Activities of coke ovens.

2. Production and processing of ferrous metals

CO2 emissions from sector

Total CO2 emissions from the integrated I&S sites

Total emissions (tCO 2)

UK NAP Approved May 2005

Basic Iron Blast Furnaces

Continuous Casting Plant

Hot Wide Strip Mills

Medium Section Mills

Heavy Section Mills

Identification of Non-benchmarked incumbents, Benchmarked incumbents and New

Scunthorpe Steel Works, extension to capacity by the modification of several different

9.2.2 Possible new entrant technologies in Phase II

Possible New Entrants in Phase 2

Integrated steel - 300 000 t/year

Coke oven - 750000t/yr

Integrated steel - 850 000 t/year

Summary of possible types of New Entrants in Phase II

Type of New Entrant

New piece of equipment

Coke and fuel

Port Talbot Coke

Coke and fuel

UKSEL CCA Targets

Original Target (PJ)

Revised Target (PJ)

1 January 2006 to 31 December 2006

1st January 2008 to 31 st December 2008

1st January 2010 to 31 st December 2010

1 January 2004 to 31 December 2004

The targets were revised in 2004

Review of Relevant Data

9.3.1 Data sources

Data from literature searches and other sources

Pig iron production in blast furnace

14.89 GJ / tonne iron

Slab production by Basic Oxygen

-0.57 GJ / tonne crude steel

Production of shaped steel by hot rolling

1.53 GJ / tonne shaped steel

Production of shaped steel by cold

1.10 GJ / tonne shaped steel

Production of crude steel

23.3 GJP / tonne crude steel

Production of crude steel

31.4 GJP / tonne crude steel

Production of crude steel

30.4 GJP / tonne crude steel

Production of crude steel

23.2 GJP / tonne crude steel

Production of crude steel

19.3 GJP / tonne crude steel

Production of crude steel

24.5 GJP / tonne crude steel