New trading period
SSAB is covered by the EU’s emissions rights trading system, and 2013 begins a new trading period which extends up to and including 2020. The EU is now decreasing the cap for greenhouse gas emissions compared with the previous trading period. The rate of emissions is such that the EU guarantees fulfillment of its target of achieving a 20 percent reduction in emissions in 2020, compared with 1990. In addition, the trading system covers new sectors, such as the aviation industry. Industries which operate in the global market and risk relocating production outside the EU in the event costs become too high, can obtain a free allocation of emission rights up to the best European performance level. The steel industry is one of those industries.
Reduced emissions are rewarded
During some of the years the system has been in place, SSAB's operations have had lower emissions of greenhouse gases than the volume covered by the allocated emission rights. This is partly due to the fact that SSAB has invested in more efficient production processes, and is also a result of the Company not having produced at full capacity due to the global economic climate. Some of the emission rights that have not been used have been sold in the regulated market for trading in emission rights. No emission rights were sold in 2012.
One aspect of the way in which the economic forces of the trading system work is that SSAB and other companies included in the system have the possibility to exchange allocated emission rights for so-called CER (Certified Emission Reduction) rights. These are emission rights that are linked to a voluntary emissions reduction project in a developing country and is conducted within the scope of project-based mechanisms provided for in the Kyoto protocol. Such projects are referred to as CDM (Clean Development Mechanism) and are financed by various parties and audited by independent authorized public accountants who report to the UN.
The emission reduction certificates (CER rights) are issued by the UN based on what each project has actually generated in terms of emission reductions. The aim is to implement improvement projects which otherwise would not have taken place, thereby contributing to reduced emissions and more sustainable development globally.
SSAB is entitled, and has chosen, to substitute some of the emission rights submitted to the emissions register with CER rights. This means that SSAB has indirectly participated in, and financed, projects for reducing emissions in other countries. Since carbon dioxide is a global issue with a global impact, the measures are of importance for the environment wherever they are carried out. The trading system creates economic incentives for companies to make these undertakings.