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4. Update the benchmark methodology for free allocation in Phase 4 of the EU ETS to make it technically feasible.
5. Accelerate transition to a circular economy. EU climate and materials policy should be integrated, taking a lifecycle perspective to ensure that materials are used in as circular way as possible.
15 Assuming an EU Emissions Allowance price of €25/t CO2 and a carbon intensity of about 2 tonnes of CO2/t primary steel. 16 KGM, GEI and ClimateWorks Foundation (2018), The Carbon Loophole in Climate Policy.
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7 Carbon performance and targets.
ArcelorMittal is making more primary steel, but emissions intensity remains constant.
Carbon intensity improvements.
The overall average carbon footprint intensity of all our steelmaking routes was 2.12 tCO2 per tonne of crude steel in 2018.17 As shown in figure 14, this has remained relatively stable since 2007 (although when looking at the sites we own today that we operated in 2007, there is a 6% improvement over the same period). During this period, the share of primary steelmaking in our production increased from 73% to 78% as we responded to changes in structural market demand.18.
Primary steelmaking using coke and coal to reduce iron ore is more carbon-intensive than secondary steelmaking using scrap powered with electricity. The increase in the primary:secondary production ratio would, other things being equal, lead to an increase in the average carbon intensity of our steel. However, as shown in figure 14, this is not the case, and our carbon intensity has remained relatively constant. During this period, we have seen improvements in energy and yield efficiencies in our primary steelmaking plants, and a reduction in the carbon intensity of the electricity grid used in our EAF plants. These two factors are effectively negated by the increased proportion of primary steelmaking, leaving the overall average carbon intensity of our steel in 2018 at a similar level to 2007.
By comparison, the global average carbon footprint intensity is 1.83 tCO2 per tonne of crude steel.19 ArcelorMittal’s higher average intensity is due to our higher use of the emissionsintensive primary steelmaking route: in 2018, we used this route for 78% of our steelmaking, compared to a global average of about 72%.20 17 This carbon intensity covers all plants which were in our operational control in the reporting year. Using worldsteel methodology, data covers scope 1 and scope 2 CO2 emissions, as well as those scope 3 emissions covering purchased pre-processed materials or intermediate products. Comparison is thus of CO2 emitted for each tonne of steel made within a uniform boundary, and may relate to a broader perimeter than is represented in other steel company data.
18 The financial crisis in 2007/8 led to a protracted decline in demand for steel, particularly from the construction industry in developed countries. In response, we gradually reduced our steel production from EAFs in Europe and North America, which serve these markets. We have also seen a relative rise in the demand for flat products over this time, which are mainly made from the primary BF-BOF route.
19 World Steel Association, Sustainable Steel: Indicators 2018 and industry initiatives. 20 World Steel Association, World Steel in Figures 2018.
Figure 13: carbon emissions and our changing portfolio 20 40 60 80 100 120 2.5.
Average CO2 intensity 2.0 0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2017 2018 2016.
Steel Production (million tonnes of crude steel) Average CO2 intensity (tCO2/tonne of crude steel)
BF-BOF DRI-EAF EAF 32 ARCELORMITTAL CLIMATE ACTION REPORT 1 CONTENTS PREVIOUS BACK FORWARD
Our total CO2 footprint across our steelmaking sites was 194 million tonnes of CO2 in 2018. ArcelorMittal also has mining activities which had a carbon footprint of nearly 9 million tonnes of CO2 equivalent in 2018.
Scope 1: 167.35 Scope 2: 12.12 Scope 3: 14.65.
Figure 14: CO2 emissions from steelmaking 2018 (million tonnes)
Total 194.12 1
2 3.
Our carbon target.
ArcelorMittal’s current target is to reduce our average carbon footprint intensity by 8% by 2020 against a 2007 baseline. This target relates to those sites we operate today that we owned back in 2007, and therefore excludes acquisitions and divestments.
Our pursuit of this target since 2007 has focused on efficiency and process improvements, many of which have been capitalintensive (see chapter 5). By the end of 2018, we had achieved a 6% reduction since 2007.
Towards a new carbon target.
We are now focusing on building a roadmap which will underpin a new 2030 carbon reduction target for our steelmaking operations. This will incorporate both the potential for further technical efficiencies across our portfolio and a limited deployment of breakthrough technologies from our innovation programme.
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Carbon performance and targets.
Figure 15: carbon efficiency improvement per tonne hot rolled coil (2007=100) 21 NB This is a different metric to that used for our carbon intensity target.
ArcelorMittal’s underlying carbon efficiency is improving.
105 100 95 90 85 80 2007 2008 2009 2010 2011 2012 2013 2014 2016 2018 2015 2017.
Carbon efficiency 100=2007 level -9%
Carbon efficiency.
Steelmaking is dependent on a number of external factors influencing the carbon footprint intensity of steel. In order to understand the underlying carbon performance of our sites, ArcelorMittal created an internal metric in 2007.21 This normalises the carbon inputs and outputs of each process to understand the performance gaps between our different sites. The sheer number of sites in our portfolio enables us to use this metric to benchmark the carbon efficiency of each one.
This process standardises the major external factors that influence carbon emissions such as raw material quality, scrap and slag reuse, and the emissions intensity of national electricity grids. These factors are mainly related to market forces and government policies, which we have limited ability to change while remaining competitive in the global steel market.
In the absence of these factors, our carbon efficiency metric allows us to monitor the performance of our sites in relation to those factors which we do directly control, such as the way our staff manage and reuse energy and carbon onsite, and the technologies we deploy.
The metric shows a 9% improvement in the carbon efficiency of our sites since 2007, as shown in figure 16. This is mainly due to our continued investment in process and efficiency improvements. It is notably greater than the progress we have made in our overall average carbon footprint intensity, which is influenced by the external factors described above.
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Summary of key metrics.
Metric 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018.
Steel production (Mt crude steel) 113.9 102.3 73.1 92.5 92.2 88.6 90.9 93.4 92.7 90.4 92.9 91.5.
BF-BOF / DRI-EAF / scrap-EAF ratio 77:8:15 77:8:15 79:7:15 78:7:15 79:8:14 79:8:13 79:8:13 80:8:12 81:7:11 85:6:9 84:7:9 83:7:10.
Total CO2 emissions (MtCO2) – steel only22,23 244 227 164 201 194 189 195 196 198 193 196 194.
Scope 1 203 189 135 167 163 159 162 167 168 167 170 167.
Scope 2 24 23 18 19 18 17 18 14 14 12 13 12.
Scope 3 17 15 11 15 13 13 16 14 15 14 13 15.
Avoided CO2 emissions from slag used in cement (MtCO2) 11 10 7 8 9 9 10 10 10 10 11 11.
Avoided CO2 emissions from use of scrap steel (MtCO2) 53 44 33 41 40 38 40 40 38 35 38 37.
Average CO2 intensity (tCO2 / t crude steel)24 2.14 2.22 2.25 2.18 2.10 2.14 2.14 2.10 2.14 2.14 2.12 2.12.
Average BF-BOF CO2 intensity (tCO2 / t crude steel) 2.44 2.54 2.57 2.48 2.38 2.40 2.41 2.35 2.37 2.33 2.31 2.33.
Average scrap-EAF CO2 intensity (tCO2 / t crude steel) 0.74 0.67 0.65 0.66 0.67 0.66 0.70 0.63 0.61 0.53 0.60 0.66.
Change in crude steel carbon intensity since 2007 (target – 8% by 2020) 0.0% 3.3% 2.6% 0.3% -4.3% -4.1% -3.3% -5.8% -4.1% -5.2% -6.2% -5.6% % sites below ArcelorMittal carbon efficiency benchmark 13% 19% 22% 28% 31% 33% 30% 38% 38% 42% 50% 44%
Approvals for energy efficiency capital investment projects (million USD)25 – – – – – – – 180 11 108 373 247
22 Using worldsteel methodology, which ensures that CO2 emissions for each tonne of steel are measured for the same set of steelmaking processes, whether or not they are owned by the reporting company.
23 Our mining footprint was under 9 million tonnes CO2 equivalent in 2018. 24 The boundary for this metric covers all of our sites; it is different to the boundary for our carbon reduction target, which only includes sites we have owned since 2007.
25 Before 2014, reporting on capex approvals was not broken down by type.
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8 Governance and risk.
Risk identification and reporting.
ArcelorMittal identifies, assesses and manages risks – including climate-related risks – on an ongoing basis. The group level strategy, R&D and sustainable development functions, and segment level experts where appropriate, assess social, environmental, regulatory, stakeholder and technological trends on an ongoing basis. In the medium to long term, climate change poses a number of risks to the business, as identified on pages 34-35. Key risks are analysed by building models and developing scenarios to understand potential financial impacts, such as our exposure to the EU ETS in Phase 4.
Short-term risks within a 12-month timeframe are identified through a bottom-up process by site management teams. Business segments consolidate the identified risks and report the top risks to the CEO office quarterly.
The company uses a risk management framework based on a blend of a COSO, ISO 31000 and an in-house model. Sites assess risks by assigning them a probability of occurrence and a potential financial impact and/or non-financial consequence such as environmental harm. The corporate risk officer works with the environment team to track and strengthen site-level understanding of environmental risks. The corporate risk officer uses Monte Carlo simulations to conduct a stress-testing exercise for the consolidated top ten short-term risks above a $50 million materiality threshold. This exercise quantifies the financial impacts for each top risk to an appropriate confidence level, and the outcome is shared with the Audit & Risk Committee.
Board of Directors.
Chaired by CEO and Chairman Lakshmi Mittal.
The Board and Chairman have overall responsibility for the governance and strategic direction of ArcelorMittal, which includes taking into account the effects of climate change. The Board has two committees with further oversight and responsibilities on climate-related issues. Risks are also considered by boards of subsidiaries worldwide.
Appointments, Remuneration, Corporate Governance and Sustainability (ARCGS) Committee.
Chaired by lead independent director Bruno Lafont.
The ARCGS oversees the implications of sustainability issues under five sustainability pillars, of which one is climate change. The chair of the ARCGS also liaises closely with the chair of the Audit & Risk Committee.
The Committee considers the implications of climate change for the business and oversees the company’s strategic planning in response to the risks and opportunities that arise. It receives regular reports from senior management, led by executive officer Brian Aranha, on stakeholder expectations, the company’s low-emissions technology strategy, climate-related policy engagement and carbon performance.
Audit & Risk Committee Chaired by non-executive independent director Karyn Ovelmen.
The Audit & Risk Committee ensures that the interests of the company’s shareholders are properly protected in relation to risk management, internal control and financial reporting. It oversees both the identification of risks to which the ArcelorMittal group is exposed, via regular senior management reports, and the management response to these risks.
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Risk management and strategic planning.
Climate-related trends and risks identified by management are used to inform the company’s strategic outlook, led by executive officer Brian Aranha. This is discussed on a regular basis by the Group management committee.
To develop our response to our longer-term climate-related risks and opportunities, we assess long-term market trends such as scrap metal availability, develop alternative lowemissions technologies, undertake cost analysis of these technologies, engage continuously with key stakeholders, and analyse the implications of different levels of policy support through the scenario analysis outlined in this report.
Central to our approach to mitigating our key climate-related risk – policy risk – is our adoption of a low-emissions technology strategy. Integral to this is our work to engage policymakers on supportive frameworks to enable significant emissions reductions to be viable, as outlined in this report. At the same time, all our business segments are required to prepare CO2 reduction plans as part of the annual planning cycle.
This report, and the assessment of the resilience of our business to the transition and physical risks described in this report, has been discussed and approved by executive officer Brian Aranha; president, group CFO and CEO ArcelorMittal Europe Mr. Aditya Mittal; lead independent director and ARCGS committee chair Bruno Lafont; and chairman and CEO Mr. Lakshmi N. Mittal.
Group executive management.
The CEO office (chief executive officer, Mr. Lakshmi N. Mittal, and president and chief financial officer, Mr. Aditya Mittal) works closely with relevant executive officers and members of the senior management on key strategic issues.
Executive officer Brian Aranha oversees the Group’s strategy on climate change and emissions reporting, as well as relevant corporate functions covering strategy, technology, R&D, communications and corporate responsibility.
Climate-related risks and group-level strategy are discussed regularly at the group-wide management committee. Responses are determined by each business segment, on the basis of the markets they serve and national or regional regulatory trends.
Business segment CEOs report quarterly to the CEO office on climate change. Europe Flat Products currently faces the most significant climate-related regulatory risk due to its exposure to the EU ETS. Executive vice-president and CEO ArcelorMittal Europe Flat Products, Geert Van Poelvoorde reports on the strategy and performance of this business segment.
Investment Allocations Committee.
Chaired by executive officer Brian Aranha.
This committee also includes VP technology strategy and VP head of strategy. This committee makes capex decisions, which includes investment to improve environmental performance, energy and carbon efficiencies.
Global Breakthrough Technology Council (GBTC) Chaired by Carl de Mare, VP, technology strategy.
The GBTC consists of regional/project based R&D officers. GBTC coordinates progress on the low-emissions technology programme.
Climate & Environment Working Group.