Supporting steel industries
Blaise Kelly offers his opinion on how governments can best support their steel industries.
Supporting steel efficiently
Saving the UK steel industry was a regular point of debate during the EU referendum campaigning. It was widely reported that EU rules on state aid meant the UK Government could not intervene. Yet, across the EU, there are examples of governments supporting their steel industries. Despite the Brexit vote, this will still be a point of debate – how have they been getting away with it?
The answer is through energy efficiency and environmental upgrades. The Ilva Taranto steelworks in Italy was given permission to accept €800 million from the Government for environmental improvements. The German steelworks Salzgitter Flachstahl GmbH was awarded €19.1 million for upgrading from electro-slag re-melting to direct strip casting, a more energy efficient process. The Swedish programme for improving energy-intensive industries gave tax breaks for improvements in efficiency, substantially reducing steel industry energy consumption.
The Italian subsidy is being challenged by the EU competition commission on the basis that limited environmental progress has been made, but the point is that EU Directive 2010/75/EU on industrial emissions (integrated pollution prevention and control), along with the Best Available Techniques guidance for energy intensive industries, all encourage energy-efficient and environmental improvements in industry.
The long-held position of UK industry is that energy costs are a large part of the problem. Because of this, the Government recently exempted energy-intensive industries from paying renewables levies, designed to penalise excessive consumption on their energy bills.
Germany also has a similar exemption from such taxes. However, one of the German steel industry’s strengths is the country’s low daytime wholesale electricity price, thanks to huge investment in its renewable energy infrastructure, which gives predictable surplus in electricity and has helped to create one of the world’s most resilient grids.
The World Health Organisation lists Port Talbot as the town in the UK with the second highest levels of particulate matter under 10µm. Within a 5km radius of the steelworks, background concentrations of benzo[a]pyrene are 25 times the National Air Quality Obligations and emissions of lead are nearly 100 times that of central London.
The European Environment Agency estimates the external cost of the health effects from emissions from the Port Talbot area is £270 million, not including greenhouse gas emissions. The pollutants affect people through inhalation, consumption of contaminated tap water, agricultural crops and animal products. The Ilva Steelworks the Italian Government is hoping to improve is situated in the picturesque region of Puglia, but is one of Europe’s most polluted areas. Residents of the nearby town are banned from touching the soil, as are farmers from using their own land.
At a time when these costs are so well documented and the need to tackle climate change is more pressing than ever, is the right approach to provide blanket subsidies for the dirtiest industrial processes? It’s a common attitude from economists that pollution is the price we pay for manufacturing success, but closing the steel works in Port Talbot won’t stop the negative impact of steel production on health. Steel is a vital resource that we still need, and provided it comes from a coal-powered blast furnace, the same air pollutants and greenhouse gases will be emitted, they will simply affect people somewhere else in the world.
Steel has the potential to be one of the most sustainable materials we use. It is extremely durable, can be magnetically separated and is 100% recyclable. Yet still, even in the developed world, its production burdens health services and reduces quality of life. At a global level, the perceived low cost of coal and other greenhouse-gas-heavy manufacturing routes saddles economies with the growing costs of climate change.
However, technologies exist to significantly improve and almost eliminate these emissions. One of these is the electric arc furnace, which produces a fraction of blast furnace emissions, can be switched on and off as required and can be powered entirely from renewable energy, where available. It also promotes the use of scrap steel, a valuable resource of which the UK exports more than 5 million tonnes – around half the 12 million tonnes of raw steel manufactured. Newport has such a facility in the pipeline and more sites can potentially be converted.
The perfect excuse to support our steel industry would be through environmental and energy efficiency improvements. This would secure our supply, reduce energy consumption, increase employment, cut global greenhouse gas emissions (not simply meet our own targets by sending industry overseas), and improve air quality in our towns and cities. We would do what the UK engineering sector has always excelled at – leading the world with the best quality products and technologies, not the cheapest.
Blaise Kelly works on air quality impact assessments and has been involved in European research projects focusing on full lifecycle analysis for energy efficiency projects.
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