Chain of custody approaches in the steel industry
The role of GHG reduction certificates
The steel industry has a long history of producing life cycle assessments (LCA) and carbon footprints (CFP) of its products.
The reductions in greenhouse gas (GHG) emissions achieved during the production of a steel product are typically passed on to customers by including these changes in an updated CFP.
In the case of GHG accounting using mass balance chain of custody approaches, these reductions are instead accumulated in a registry and sold to customers in the form of GHG reduction certificates alongside the steel product with its original CFP.
The certificates can then be used by customers to reduce their upstream scope 3 emissions. This can be a useful tool to both satisfy the increasing demand for low-carbon steel products and to recover some of the cost for making the reduction, i.e. the green premium.
Partial reduction projects in the steel industry can result in significant CO2 reductions, but due to the size of overall emissions, they are much less noticeable once they have been incorporated into the CFP of a product.
Today, there is no standardised methodology for GHG chain of custody approaches, and companies have therefore developed their own approaches.
As these schemes multiply, the need for industry guidance has become increasingly clear. There are also other approaches being developed, including ISO 14077 – chain of custody in LCA; book and claim approaches, which decouple the carbon footprint from the product being sold, and many other industry-specific approaches.
worldsteel, together with its members, has developed a set of set of Principles and Guidelines for the steel industry to provide transparency and clarity on this specific type of application of GHG accounting to generate emission reduction certificates following a chain of custody approach.
The intention is not to recommend using such approaches, but to provide guardrails and recommendations to help avoid issues related to double-counting and to provide clarity and transparency to all stakeholders.
This work can also feed into other organisations developing similar approaches, such as the development of ISO 14077 and UNIDO’s Industrial Deep Decarbonisation Initiative.