CBAM’s Industrial Shockwave

In the first part of the CBAM article, we discussed the concept and the way it is being discussed in international trade and climate negotiations. In this article, we will discuss the impact of CBAM on ‘hard to abate’ sectors such as Iron and Steel, Cement and Fertilisers.

Impact of CBAM on Manufacturing of Iron & Steel, Cement and Fertilisers

Iron & Steel

In the early days of the industrial revolution, steel was produced by the ‘Bessemer’ process, wherein molten pig iron is poured into a large vessel, which is then blasted with air. This oxidises the impurities such as silica, manganese and carbon, which are separated as slag, leaving behind pure molten iron. This is poured out to make finished steel. The Bessemer process was an inexpensive way of making basic steel. Later, blast furnaces were used to make steel, where coal (or natural gas) is first heated to 1000°C to convert into carbon-rich coke. This coke is then used as a reducing agent in a furnace, which is heated to 1500°C, wherein iron ore, which is an iron oxide, is reduced to liquid iron. The oxide reacts with carbon to emit carbon dioxide, leaving behind melted iron, which is again blasted with air to remove other impurities, leaving behind steel. The blast furnace was further improved to the Electric Arc Furnace (EAF), where the heating was done by electricity.

However, the most environmentally friendly method of steel production is the DRI Hydrogen Reduction method. This method uses hydrogen instead of carbon for the reduction of iron ore and leads to direct reduced iron (DRI). This is then processed in an EAF described above. It is important to shift to ‘green’ steel because steel production alone accounts for 11% of carbon dioxide emissions. Even though the cost of production of steel through the blast furnace method is lower than the DRI Hydrogen reduction method, this is likely to change in the future, if countries begin to price carbon and use green hydrogen. For example, if the carbon dioxide price rises to US$15/ton and the hydrogen price is US$1.5/kg, the cost of steel produced by the DRI-EAF method is lower than that produced by the blast furnace method.

Cement

Cement manufacture emits large amounts of greenhouse gases and is highly energy-intensive. When the mixture of limestone and clay is heated at high temperatures in a kiln, the calcium carbonate breaks up into Calcium Oxide and Carbon Dioxide. The clinker that comes out of the kiln is cooled and mixed with gypsum and milled into a powder form. This is nothing but cement. According to Paul Hawken’s Drawdown, one ton of cement requires 180 kg of coal and emits one ton of carbon dioxide. With 5 billion tons of cement production in the world (with half of it coming from China), this translates to 5 billion tons of carbon dioxide annually.

A lot of research is going on to make the cement kilns more energy efficient as well as replace the conventional clinker (that is a major carbon emitter) with alternatives such as volcanic ash, biomass, fly ash and slag, which is an industrial waste. This is because the kiln uses 90% of the energy used in cement manufacturing. Another way to reduce carbon emissions in cement manufacturing is to set up CCUS (Carbon Capture, Utilisation and Storage) plants along with cement plants. While this involves initial capital costs, it will become sustainable as the carbon price rises. A McKinsey study has estimated that cement production will become costlier by 45% by 2050, if a CCUS plant is added, but this will become sustainable as all cement worldwide slowly shifts to capturing carbon.

Fertilisers

The production and use of fertilisers, particularly Ammonia, also lead to greenhouse gas emissions. Ammonia is the source of Nitrogen, which plants need to grow. However, crops only take up half of the nitrogen they get from Ammonia, and the rest runs off into rivers or gets broken down by microbes in the soil, releasing nitrous oxide, another greenhouse gas, into the atmosphere. Nitrous oxide is only a small part of greenhouse gas emissions, but it warms the planet 300 times as much as carbon dioxide. Ammonia is also a highly energy-intensive product, which is a source of greenhouse gas emissions, too. A shift to ‘green’ Ammonia, where its production is with renewable energy and more consumption of biofertilizers and green manure, has to become mandatory to escape the CBAM impact.

The writer is Additional Chief Secretary, Department of Cooperation, Government of West Bengal