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Translating Climate Change Issues Into Operational Reality

Translating Climate Change Issues Into Operational Reality. David Clarry March 5, 2008. Climate Change. Why is the world paying more attention to climate change What is the operational / technical “target” for CO2 emissions reduction

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Translating Climate Change Issues Into Operational Reality

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  1. Translating Climate Change Issues Into Operational Reality David ClarryMarch 5, 2008

  2. Climate Change • Why is the world paying more attention to climate change • What is the operational / technical “target” for CO2 emissions reduction • What are the mechanisms that put a cost on CO2 emissions, and what might that cost be • What are the implications in steel production costs • What can we do Climate Change

  3. IPCC Summary Intergovernmental Panel on Climate Change – Climate Change 2007: Physical Science Basis, February 2007 Why

  4. GHG Emissions by Type and Source Why

  5. Reduce by how much ? From IPCC Fourth Report

  6. A very rough reduction scenario … • Canadian target of 20% below 2005 by 2020 • Bali non-binding agreement to 25% to 40% reduction in Annex 1 countries by 2020 35% intensity reduction by 2020 How Much ?

  7. Some key jurisdictional actions • Europe – ETS, system of hard caps on emissions • United States – state initiatives aimed initially at energy sector • Canada • Alberta – regulation in place as of July 2007 • 12% intensity reduction target by December 31, 2007 • Achieved by reductions, purchasing offsets, or paying $15/tonne • National - draft Clean Air Act • 18% intensity reduction from 2006 levels by 2010 • 2% annual intensity reduction every year thereafter • Australia – state initiatives, potential for national initiative How Much ?

  8. A world of opportunities and/or regulation Most of world is part of Kyoto Many of our project countries are eligible for credits How Much ? Kyoto Annex 1 Countries (emissions targets) Kyoto Annex 1 but no mechanism in place Kyoto “Non-Annex 1” – credit opportunities Non-Kyoto reduction regulation

  9. Developing Country Credits are Real • ~$2 Billion of CDM credits have been sold to date • ~ $200 million of this revenue has gone to Iron & Steel projects How Much ? Ref: www.cdmpipeline.org (January 26, 2008)

  10. Carbon credits represent real projects • Yangquan Coal Industry (Group) Co., Ltd. - Environmental Finance Magazine “Carbon Finance Transaction of the Year” • use of coal mine methane for power generation and alumina production projects • reduce emissions of CO2 by 17.8 million tons between 2007 and 2012 • Also reduces SOx, NOx • Iron & Steel • Combined Cycle Power Plant to generate electricity from blast furnace and coke oven • 6.6 MtCO2 reduction over 10 years

  11. Potential mitigation / trading costs • EU credit value has ranged from less than 1 Euro to more than 20 Euros over the past year • A longer term view can be gained from costs of abatement How Much ?

  12. Industry impact: example for integrated steel • A “typical” integrated steel mill could experience carbon costs in the range of $17/t to $55/t steel • If CO2 credits were $40/t (McKinsey curve) this would be higher How Much ?

  13. Industry impact: example for aluminum • Cost of GHG emissions from “average” smelter is ~ $200/t • From recent concept study of “BAT” plant using hydroelectric power • Smelter & anode emissions ~ 1,000 to 2,000 kg CO2e per 1,000 kg Al • Cost of emissions $25 to $50 at $25/t CO2e • Actual cost of CO2e ? • Europe winter 2008 - $40/t CO2e How Much ?

  14. Impact on industry • Regulatory changes and uncertainty • Regulation in Europe & Japan (and Alberta) • Pending regulation in many jurisdictions • Evolving global agreements will lead to more regulation within plant lifespans • How to level playing field with developing countries • Public scrutiny • Some EIA processes now require GHG analysis • Investors and stakeholders looking for GHG responses • Financial opportunities • Some Jurisdictions (South America, Russia, China, …) offer projects the potential to sell GHG credits Impact

  15. Impact on industry (cont.) • A changing climate • Permafrost and ice roads less reliable • Anticipated trends in water availability, sea levels, …. • Warnings of more extreme weather variations Impact

  16. Areas of response • Abatement • Energy & GHG efficiency • Process technology (non-carbon reduction, biomass reductants) • Alternative energy sources • CO2 capture and sequestration / fixation • Adaptation • Design standards • ESIA considerations • Retrofit

  17. Stages of response • Planning / risk management • Technology development / demonstration • Operations / management action • Capital investment

  18. What is happening now - Hatch Project Examples • GHG Inventories & lifecycle analysis • GHG abatement planning • Energy efficiency studies with GHG component • Competitiveness studies • Clean coal technologies – studies and demonstration plants • Coal Bed Methane liquefaction for transportation fuel • CO2 capture / sequestration / fixation • Boiler flue gas CO2 capture for process use • Captured CO2 for enhanced oil recovery • Reducing bauxite residue PH through CO2 fixation (Alcoa) • Development of GHG credits for project financing • Alternative Energy • Adaptation - Australia Western Corridor water recycling Hatch

  19. Thank You

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