AISI: The environment is a trade issue – why we need carbon tariffs

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The American steel industry is the backbone of the American economy and produces some of the cleanest steel in the world. Among major steel producing countries, the United States emits the least carbon dioxide (CO2) per ton of steel produced and is the least energy intensive. In contrast, China’s steel production produces twice as many carbon emissions as the carbon emissions from US steel production, and India’s steel production has an even higher emissions intensity. In fact, in 2019 imported steel accounted for 11 million tons more CO2 emissions than if steel were produced at average U.S. emissions levels.

Not only do American steel producers make the world’s cleanest steel, they also enable other industries to reduce their carbon footprint. According to his January 2022 report from McKinsey & Co., steel is the only material that is important for all low-carbon technologies. Wind and renewable energy systems, zero-emission electric vehicles, power grids, hydrogen production, and carbon capture systems all rely on steel. For example, steel makes up more than 70% of the weight of a typical wind turbine, and a new megawatt of solar power requires 35 to 45 tons of steel.

However, America’s steel industry and clean steel production face significant threats. Subsidies and trade distortions in many countries are contributing to a large global steel overproduction, which the OECD estimates is around 612 million tonnes and growing. Much of this excess capacity is in countries that produce steel that emits far more carbon than American steel. India, for example, is rapidly expanding its high-emission steel production capacity. Furthermore, as a result of China’s Belt and Road Initiative, Indonesia, Vietnam, and other Southeast Asian countries are building significant additional high-carbon steel production capacity, much of it with Chinese capital.

As steel manufacturers in these countries seek to maximize capacity utilization to cover fixed costs, a significant amount of this high-emission steel production may be exported to other parts of the world, including the United States. This is expected to result in billions of dollars in lost profits. The amount of investment the U.S. steel industry is spending on cleaner steel production. To counter this threat, a new system of carbon or greenhouse gas (GHG) intensity-based pricing is needed.

For the past two years, the Biden administration has been negotiating a Global Deal for Sustainable Steel with the European Union, which would establish a new tariff system based on the carbon intensity of steel imported from around the world. But despite the administration’s best efforts, European Commission trade officials are reluctant to agree to a U.S. proposal to impose tariffs based on the difference in carbon intensity between imported and domestically produced steel. Given persistent opposition from EU trade officials, AISI believes the time has come for the United States to enact its own carbon tariff into U.S. law.

Leading U.S. senators also agree with AISI’s position. Just last week, U.S. Sen. Bill Cassidy (R-Louisiana) introduced a bill that would impose a carbon border tariff on imports with associated greenhouse gas emissions intensity higher than those of competing U.S. products. . Importantly, this bill is not an effort to impose a domestic carbon tax or a tax on U.S. industry. Rather, it aims to reward cleaner domestic manufacturing while limiting the emissions of foreign competitors. AISI and its members have concerns about how this bill deals with steel imports from some countries and will work with bill sponsors to address these issues as the legislative process moves forward. I will do my best to We believe that establishing a comprehensive greenhouse gas border tax or carbon tariff will level the playing field and ensure that U.S. steel investment in cleaner production processes is not undermined by emissions-intensive imports from abroad. I believe it will help you do so.

Another key element in establishing an effective carbon fee is the development of appropriate methodologies for calculating GHG emissions associated with steel production. Different groups currently use multiple and conflicting approaches to measuring such emissions. To address this issue, AISI last year published its GHG Emissions Calculation Guidelines, which provides a unified industry view on how to calculate consistent and comprehensive data on GHG emissions from steel production. did. Consistent datasets will help ensure that policymakers have the most accurate information available when driving carbon pricing and other related policy initiatives.

A second related bill, introduced this summer by Sen. Chris Coons (D-Del.) and Sen. Kevin Cramer (D-Del.), calls for “Reliable, Objective, and Verifiable Emission Intensity and Transparency.” This is the “PROVE IT” law. , with a bipartisan group of co-sponsors. This law requires the U.S. Department of Energy to conduct a comprehensive study comparing the GHG emissions intensity of certain products, including steel, produced in the United States with the emission intensity of the same products produced in other countries. I am giving instructions. This is intended to demonstrate the comparative greenhouse gas emissions advantage that U.S. manufacturers have over international competitors with higher emissions intensity, and the data developed as a result of this law could be used to calculate carbon tariffs on imported goods.

In parallel with these legislative efforts in Congress, the U.S. International Trade Commission (ITC), at the direction of the U.S. Trade Representative (USTR), is conducting a new fact-finding study to assess the greenhouse gas emission intensity of steel. We are getting started. Produced in the USA. The study will involve ITC collecting data on GHG emissions from U.S. steel producers through a survey to be issued next year. The findings are expected to be released in January 2025 and are intended to provide a basis for calculating the difference between the domestic industry’s greenhouse gas emissions intensity and those of foreign steel producers. This is a necessary step towards developing a GHG intensity-based pricing structure. He is working closely with the ITC as AISI works on this important investigation and is scheduled to testify at his ITC hearing on this topic scheduled for December 7th.

AISI believes that investments in clean steel production by domestic producers, combined with carbon tariffs, will ensure the U.S. steel industry can grow while continuing to reduce greenhouse gas emissions. This is in sharp contrast to the approach taken in other countries to force cleaner production through the imposition of domestic carbon prices or taxes that penalize new steel production. In fact, a recent analysis by World Steel Dynamics found that North America is the only region in the world expected to reduce total greenhouse gas emissions associated with steelmaking while increasing total steel production. be. This production increase will help meet increased demand as we transition to a low-carbon economy, where steel plays a key role.

The U.S. steel industry’s leadership in decarbonization, and the investments and progress our steel industry is making in sustainable steel manufacturing, is being increasingly heard in Congress and the Administration every day. The most effective way to ensure this progress continues and maintain a foothold in the world’s cleanest steel production is through carbon tariffs that hold the world’s most greenhouse gas-intensive producers accountable. Through policies such as For more information about sustainability in America’s steel industry, visit AISI’s website at www.steel.org.



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