Schoolchildren at KA Atheneum, in Zelzate, may not learn much about climate change. “We are not interested in talking about this topic”, said Anja Van Parys, school Director, expressing her no comment to our request of interview. Those kids would be surprised, though, to know that their health depends on the way policymakers and industries deal with global warming. If they were naughty enough to climb on the school-yard roofs, they could even watch the planet heating up in real time along the waterfront docks, where smoking chimneys blow out carbon dioxide (CO2) just a few kilometers away.
Indeed, Zelzate is one of the villages locked in Gent industrial harbor, home to the second largest flat steel plant in Europe, owned by Arcelor Mittal, world leader in the steel sector. This giant factory, employing 4.000 local people, is the Flemish champion of CO2 as well as of fine dust, or particular matter (PM), typically responsible for health issues among youngsters. In 2011 a joint investigation by Flemish researchers proved that PM concentrations from all sources (industry, transport, agriculture, households, etc.) are responsible for premature deaths among children born in pollution hotspots exceeding EU warning limits, such as Gent’s harbor.
According to government records, more than 60% of PM emitted in Ghent district is associated to the industry. Arcelor Mittal accounts for 10-14% of PM concentrations in Zelzate and in neighbouring villages, topping all other local sources. It should be noticed, though, that about 75% of the total dust in Gent industrial area originates abroad, Flanders being sandwiched between major European industrial regions.
Trying to understand why the air they breathe is filled with nasty particles related to unsuccessful climate regulations may sound like a boring puzzle to local teen-agers and their families. Then, we’d better trigger their interest by starting our puzzle solution path from an intriguing story that took place in a remote and exotic land, 10.000 Km east of Zelzate: precisely, the Republic of China.
Back in 2005, half-way between Beijing and Shanghai, the State-owned refrigerants factory Shandong Dongyue had the same smart idea than other Chinese chemical plants: setting up an “emissions forgery” to dupe the international emission trading mechanism and maximize profits. Within the UN-overseen mechanism set up by the Kyoto Protocol, climate projects in developing countries that eliminate CO2, or other greenhouse gas, are rewarded with certificates called carbon credits. Each certificate equates to a ton of CO2 removed from the atmosphere. Projects owners are free to sell those certificates, or credits, worldwide. The project lunched by Shandong Dongyue aimed to destroy HFC-23, a greenhouse gas resulting from refrigerants production and generating a global warming effect thousand times worse than CO2. And here it comes the funny twist: the company intentionally over-produced refrigerants to boost the volumes of HFC-23 to be captured and create artificial emission reductions. In this way, it secured and shipped overseas millions of inflated credits that did not correspond to real greenhouse gas abatements.
European large polluters happened to be the main buyers of such dodgy credits since they could use them to compensate for their own emissions and meet the EU caps. EU regulators eventually banned the HFC-23 credits as of May 1 2013. But the harm was done. The forged certificates already represented over 50% of the total credits exchanged in the European Emission Trading System (ETS). Carbon trading intermediaries had no other option than massively selling off the outlawed certificates before they turned junk, pushing prices of all credits to a record low.
In addition to that, the “price of carbon” also dropped due to an over-allocation of emission permits relative to companies’ actual emissions, sharply decreased as a result of the financial crisis. In fact, the ETS legislation authorizes national governments to distribute permits among companies to alleviate their CO2 reduction burden. Since companies are allowed to partially replace national permits with international credits, big polluters played a smart game: they kept buying ultra-cheap credits to save bulks of exceeding and affordable permits for future emission compensations. In this way, they will be able to comply with their obligations at the lowest cost, without having to invest in innovative technologies to reduce substantially their emissions. Being the steel industry one of the largest CO2 (and PM) emitters in Europe, no surprise that Arcelor Mittal, at cross-border group level, is the EU largest buyer of credits, according to statistics by Sandbag, a London-based NGO that monitors the integrity of the ETS.
Fine. However, schoolchildren at KA Atheneum may still wander why this odd “hot air trading” thing should bother their tranquil life in Zelzate. So, let’s go back to the Chinese climate scam. During their journey from Asia to Europe, large volumes of questionable credits supplied by Shandong Dongyue ended up in the portfolio of a few plants operating in Flanders, including Electrabel and AlcoBiofuel in Gent. Arcelor Mittal’s plant got the biggest shopping-case: almost 4.1 millions HFC-23 credits until 2012, based on Sandbag calculations. Nearly half of them replaced the permits sold by the company to fund its energy efficiency investments. However, the majority of credits added up to the generous allocation awarded by the Flemish government between 2008 and 2012. This granted Arcelor Mittal an excess of 26 millions permits above its 20 million tons of emissions, as documented by EU data.
Now, the question is: why Arcelor Mittal should pay a fortune to reconvert its local plant operated with dirty coke to a cleaner plant, when it can offset its emissions through using exceeding permits or buying more permits and credits, available respectively for less than 3 and 1 euro per ton? “So far, we have invested over 200 millions euro in pollution control systems”, said Ronald Mortier, Head of the Environmental Care Department at Arcelor Mittal in Gent, “Our CO2 emissions decreased by 20% since 2002 and our dust spills by 80% since 1990, but now we are reaching the limits of our technical possibilities. And, as of today, there is no viable alternative to coke for the steelmaking process out of iron ore”
Actually, promising alternatives exist. But steelmakers have no economic convenience to embrace them. Since 2004 Arcelor Mittal Group has carried on the ambitious 600-million-euro-worth ULCOS research project, backed by a consortium of major European steelmakers and co-funded by the EU. The largest share of ULCOS budget supported the upgrading of present coke-based technologies. Nonetheless, part of the money was spent to develop new technologies replacing coke with fuels containing less carbon, such as gas and electric power. “Those technologies would allow to reduce not only CO2 but also PM emissions, by up to 80%”, said Jean-Pierre Birat, formerly manager and responsible for ULCOS project at Arcelor Mittal Group, and presently Secretary General at European Steel Technology Platform, a Brussels-based organization promoting innovation in the steel industry (deleted sentence: that represents one of the largest CO2 and PM emitters both in Flanders and in Europe” – moved in the previous paragraph: “Being the steel industry one of the largest CO2 (and PM) emitters in Europe,…”), “We achieved good results in the lab test stage: with further investments those technologies could reach the production stage in 10 years from now, but steelmakers will only adopt them when the projected long-term price of carbon is high enough to make gas-based and power-based production cheaper than coke-based production”.
Birat’s views are shared by EU officials. “Higher carbon prices would lead to technologies that enable higher levels of pollutants reduction becoming more economically viable”, said Joe Hennon Environment Spokesman at the European Commission. “Reducing the amount of combusted fossil fuel is the most effective way of tackling both CO2 and PM emissions, even though industrial sectors covered by the ETS are responsible for a relatively low share of PM in the EU, compared to other sources, mostly households and transport”, said John Van Aardenne, expert on climate policies and air pollution at the European Environment Agency that has recently released an alarming report: between 2009 and 2011, up to 96 % of city dwellers in Europe were exposed to PM concentrations above the World Health Organization guidelines, suffering breathing and cardiovascular diseases.
Market analysts foresee an increase of carbon prices due to the post-crisis recovery of industrial production that will boost emissions and permits demand and, possibly, to more stringent CO2 reduction obligations provided that the controversial ETS reform goes through. Steelmakers using coke would then have to bear higher production costs unless they make forward-looking investment decisions to switch to low-carbon technologies.
This is a likely better future. “In the meantime, the ETS is at the mercy of political uncertainty”, said Richard Chatterton, Carbon Market Analyst at Bloomberg New Energy Finance in London. Through Eurofer, the powerful Brussels—based European steelmakers lobby, Arcelor Mittal is opposing all reform measures proposed by the European Commission to invert the price curb, including the withdrawal of exceeding permits and the limitation of credits use. “From now to 2020 we expect a permits shortage of 20% compared the to previous period, as a result of the new EU allocation procedures that took effect this year”, said Wim Van Gerven, CEO of Arcelor Mittal Gent, “Therefore if prices go too high, say 30 euro per ton, we’ll simply go out of business or move to places, like China, where our international competitors do not have such burden. Innovation would be reasonable only if the ETS were globalized so that everyone is submitted to the same rules”.
Until this perfect “carbon world” wished by EU steelmakers becomes reality and Arcelor Mittal commits to go ahead with its ULCOS project, schoolchildren at Zelzate will hopefully grow up in a healthy way, despite the daily exposure to heavy metals and elemental carbon. “Elemental carbon is probably one of the most harmful substances to human health, even though it represents the smallest fraction of PM”, said Edward Roekens, Head of Division at the Flemish Environment Agency, “80% of elemental carbon in Zelzate originates from local sources, including traffic and Arcelor Mittal’s blast furnaces where coke is combusted to smelt iron ore and turn it into steel”. However, most of Arcelor Mittal’s PM comes from the transportation and handling of raw materials during the different production stages, as reported by several studies.
“PM affects the physical development of youngsters”, said Vera Nelen, Director of the Flemish Provincial Institute of Hygiene, field-research partner of the bio-monitoring project coordinated by the Flemish Institute for Technological Research within a consortium including the Universities of Gent, Antwerp, Hasselt, Leuven and Brussels, “This initiative will help mapping the exposure to pollutants and its effects on teenagers who live in the Gent harbour”. This year Nelen’s team will be collecting interviews, samples and examinations targeting high school students aged 14-15, including those at KA Atheneum in Zelzate. Through combining different criteria, it will be finally possible to determine the true health impact of local industrial activities. Results are expected at the end of 2014.
Two years later, the Flemish government will review Arcelor Mittal’s environmental licence, as announced in the anti-pollution plan approved in 2005. “Arcelor Mittal will have to reduce its PM emissions to the levels achievable through using the best available techniques included in the EU harmonized list for the steel sector”, said Joke Schauvliege, Flemish Minister of the Environment. This list, enforcing the new EU industrial emissions legislation, doesn’t include ULCOS advanced technologies. Indeed, EU regulators, duly advised by the industry, decided that only widely used applications, such as coke-powered machineries, must be considered “best available techniques” from an economic perspective. What about the environmental and health perspective? The best answer to this question came from Kevin Reygaerts, spokes person of the residents association of Sint-Kruis Winkel, the closest village to Arcelor Mittal plant: “When we discussed PM issues with the company management, they admitted that they will not do more than required by binding regulations. And, of course, public authorities don’t put too much pressure on the plant since it plays a strategic role in the local economy”.
Should the EU fail to adopt stricter ETS regulations, forcing innovation and reduction of dirty fossil fuels consumption, Arcelor Mittal will continue to relay on coke for many years to come, thus contributing to worsen both climate change and health quality in Gent harbor neighbourhood.
Box – EU legislation on pollution in a nutshell
Big EU polluters have to comply with different pieces of legislation aimed to control both climate change and pollutants affecting the health and the environment, in particular with the following:
- The European Emission Trading System (ETS) covers more than 11,000 heavy energy-using operators, power and manufacturing plants as well as inbound and outbound flights, that represent around 45% of greenhouse gas emissions in the EU and the three EEA-EFTA countries (Iceland, Liechtenstein and Norway). The ETS works on the ‘cap and trade’ principle. A ‘cap’, or limit, is set on the total amount of greenhouse gases, mostly CO2, that can be emitted by an operator. Companies get emission allowances, commonly known as emission permits, which they can trade with one another as needed to meet their emission caps. They can also buy limited amounts of international credits from emission-saving projects in developing countries. The limited number of allowances available for trading ensures that they have a financial value. If a company reduces its emissions, it can keep the spare allowances to cover its future needs or else sell them to another company that is short of allowances. Each year, companies need to report both their verified emissions and the number of used allowances. The ETS already went through two stages, 2005-2007 and 2008-2012, and is now in its third phase, running from 2013 to 2020. A major revision approved in 2009 makes the news phase more harmonised than the previous ones. The main changes are:
- The Directive on industrial emissions (IPPC) covers 50,000 energy, metal, chemical, waste and other types of processing plants in the EU that emit pollutants harmful to health and the environment, including PM. Factories are required to ensure, among others, that:
- the best available techniques (BAT) are applied to reduce pollution;
- no significant pollution is caused;
- energy efficiency is maximised.
The European Commission adopts decisions establishing harmonized BAT lists, including related emission levels, per each relevant industrial sector. These decisions shall serve as a reference for the drawing up of permit conditions by national authorities. The latter need, among others, to:
- ensure that factories put in place effective emission measurement and evaluation procedures and inform them of the monitoring results, at least once a year;
- set out the conditions for assessing compliance with the emission limit values
- carry out on-site inspections.
Special provisions apply to combustion plants, including steel plants blast furnaces, that can benefit of emission limit exemptions under special circumstances.
- The European Pollutant Release and Transfer Register (E-PRTR) covers 28.000 thousand facilities operating more industrial sectors than those covered by the ETS and the IPPC, both in the EU and EFTA countries.The E-PRTR sets thresholds for each of the 9 target pollutants, including CO2 and PM. Where an installation emits above the thresholds concerned, then it must report its releases, once every two years. The actual thresholds allow to cover, for each specific pollutant, about 90% of the total emissions from facilities registered in the E-PRTR.