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ThyssenKrupp Steel Warns that Emissions Trading Could Affect Competition

Feb. 10, 2004 — Negotiations on the national allocation plan, which is central to the emissions trading scheme, are deadlocked. The Federation of German Industries (BDI) and representatives of the affected industry associations have rejected the proposals put forward by the German Environment Ministry (BMU) as inadequate. ThyssenKrupp Steel AG welcomes this decision.

Dr. Karl-Ulrich Köhler, Vice Executive Board Chairman of ThyssenKrupp Steel AG and Chief Executive of its biggest operating company, ThyssenKrupp Stahl AG, says: “We cannot accept a situation where our competitiveness suffers as a result of emissions trading. In the proposals put forward by the Environment Minister, this would be the case not only vis-à-vis non-EU countries but also within the European Union itself. For example, it was recently reported that our Anglo-Dutch competitor Corus is to receive certificates for around 100% of its current emissions.”

Dr. Köhler concludes that the program put forward by Environment Minister Jürgen Trittin would not only lead to the short-term loss of highly qualified jobs at ThyssenKrupp Steel AG’s German locations, but in the long-term would bring about the end of steel production in Germany. “That cannot be in the interests of the German economy, especially as we have already almost achieved our target of a 21% reduction in CO2 emissions by 2012. That makes Germany — which bears 75% of Europe’s emission reduction burden — one of the EU leaders in CO2 reductions, alongside the UK and Luxembourg.”

Dr. Köhler also draws attention to the particularities of the steel industry, which are largely disregarded in the BMU proposal. The production of iron and steel causes emissions due to the raw materials used. These emissions have been minimized as far as is technically possible at ThyssenKrupp Steel’s plants. There are no alternatives to the technologies used in blast furnaces and melt shops. “That means we can only reduce our process-related emissions by cutting back our production. This kind of intervention in business decisions is incompatible with market economy principles,” says Dr. Köhler. Purchasing certificates on the basis proposed by the BMU would involve annual costs in the tens of millions of euros even in the first phase of the scheme. Assuming a price of €15 to €25 per ton of CO2, this would mean additional costs of between €30 and €50 per metric ton of crude steel. It would not be possible to pass these costs on to the market, since this would entail a price increase of up to 20%. As this would exclusively impact the German steel companies, it would result in a further distortion of competition in the European sector.

ThyssenKrupp Steel cannot comprehend the argument that emissions are not released during production but only after processing. The energy network is essential to the running of an integrated steel mill. It can be seen as a kind of combined heat and power (CHP) plant, but with coal and coke as the primary energy source rather than gas.

Dr. Köhler: “In view of the specific problems of the steel industry, for phase 1 of the emissions trading scheme we demand that the government issue us free of charge with certificates for 100% based on CO2 emissions between 2000 and 2002. For all periods beyond this, the process-related emissions should be recognized in the required amount with no obligation to make further reductions, which is technically impossible. Moreover, the typical German additional charges from emissions trading, eco tax, CHP legislation and the law on renewable energies must be eliminated.”

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