Posted on 09 Aug 2023
How the US General Services Administration (GSA), which oversees federal government procurement rules, sets maximum emissions levels for “low embodied carbon” (LEC) construction materials under the “Buy Clean” provisions of the Inflation Reduction Act (IRA) is of great importance to steelmakers, sources told Fastmarkets. The GSA’s determination could limit the extent to which blast furnace (BF) steelmakers are able to participate in the IRA’s anticipated $2.15 billion in contracts for LEC materials alongside lower-emitting electric-arc furnace (EAF) producers.
“Some in the industry believe that [limiting BF participation] could be an unintended consequence of ‘Buy Clean,’ the IRA tax incentives and some other federal initiatives,” a source familiar with US steel policy told Fastmarkets. “The industry is working to mitigate that.”
In May, the GSA launched a six-month pilot process to establish materials requirements for $300 million worth of LEC materials, including steel, asphalt, concrete and glass, to be used in 11 IRA-funded government construction projects. The process created separate categories for EAF and “integrated”, e.g. BF steel production.
The separate categories approach differs from that of the GSCC, a coalition of steelmakers, associations and industry groups, which published its 48-page Steel Climate Standard on Thursday, August 3. The GSCC’s voluntary framework seeks to incentivize producers to meet “science-based emissions targets that align with achieving the 1.5-degree Celsius scenario by 2050.” In contrast to the GSA, it is “agnostic” of the steel production process used.
Meanwhile, the GSA’s pilot process sets “better than average” emissions limits for EAF-produced structural steel plate at 1,190 kilograms of carbon dioxide equivalent (CO2e) per metric ton, for example, but has yet to determine similar limits for plate produced by integrated mills. Those requirements will be determined once more data is available from the integrated mills’ environmental product declarations, which measure the amount of carbon emitted over a product’s life cycle, the GSA said in May.
The agency said it specifically wanted to create separate categories for EAF and integrated mills “to promote innovation throughout the industry and lower emissions from all processes.” The GSA said it plans to use the results of its pilot process to inform the material requirements that will be used in all IRA-funded projects.
But Phil Bell, president of the Steel Manufacturers Association (SMA), believes having separate categories based on production methods is a mistake.
Bell said that the SMA, which represents US EAF steel producers and is a founding member of the GSCC, believes that the GSA should simply require government buyers to choose steel that has the lowest “embodied carbon” levels, rather than have two sets of standards. He said that reflects lawmakers’ intention when they set up the “Buy Clean” provisions in the IRA. He mentioned:
I would like the General Services Administration to follow the statute, which requires that it buys steel with the lowest embodied carbon emissions, period. If that is the case, the GSCC standard will prevail.
GSCC-certified producers will likely find demand for their cars, appliances and other products from original equipment manufacturers (OEMs) that are increasingly attuned to growing consumer scrutiny over emissions levels from steel, Bell said.
Founding members of the GSCC – including Nucor Corporation, Steel Dynamics, Inc and Commercial Metals Company, all of which produce steel via EAF – announced their support for the group’s newly published standard in press releases issued on Thursday.
The GSCC standard, Bell said, can be met by integrated mills that are willing to make the “necessary investments” in technology, using carbon offsets or other means.
Bell said in an April interview that he believes that the use of a “sliding scale” approach that allows for different emissions standards based on production processes amounts to “greenwashing.”
But the steel sector policy source added that all US steelmakers – even those with BFs – use EAFs to some degree, opining that the Biden administration should focus on promoting American-made steel in place of higher-emitting foreign imports.
“That’s the steel industry’s goal, to make sure that the ‘Buy Clean’ standards and the IRA tax incentives and all of those things continue to support that vision – that steel should be made in America,” the source said.
Source:Fastmarkets
