The Greenhouse Gas Abatement Process (G-CAP) has assisted several steel companies to develop Greenhouse Gas (GHG)
management strategies. G-CAP identifies the CO2 abatement alternatives within the business and the cost/time required to
implement them.
The key driver for steel producers to use G-CAP has been the emergence of a price on CO2 emissions. What previously
could be emitted with no economic consequence to the business now presents significant financial risk. For instance a
carbon price of $20/t reduces the typical integrated steel company’s net profit by around 25%.
Governments recognise the harsh impact that carbon pricing has on Emissions Intense Trade Exposed Industries (EITEI) and
have been providing protection from the full effects of carbon prices. This has been in the form of quotas or freely
allocated permits. Purchasing permits is an unattractive prospect as the price is uncertain as is the availability of supply.
Purchasing permits year on year to cover the allocation shortfall is an unacceptable risk to the business. Businesses need
the ability to strategically plan to take control of abatement opportunities.
G-CAP provides the method for a business to take control of its abatement opportunities. By analyzing the amount of
abatement that is achievable and the cost (in Net Present Value) to achieve it, a strategic plan is developed. The primary
output is a Marginal Abatement Cost Curve (MACC).
Each of the bars on the MACC represents an abatement activity within the business. These range from energy efficiency
initiatives to changes in product mix and the shutdown of operations. The vertical axis is the NPV cost/tonne CO2 abated;
note that negative cost (below the axis) is profitable abatement. The horizontal axis is the amount of CO2 abated by each
activity.
The key benefit of an MACC is that it is a dynamic
abatement model for the business. It is responsive
to changes. For instance, if the carbon price
changes to $50/t it becomes economic to abate
almost all of the 2,000kT CO2. If the permit
allocation changes the business is in a position to
rapidly assess the additional cost of abatement or
permit purchase.
From the MACC the business creates its capital
investment plan. This allows the business to
forecast how much capital is required to achieve
its abatement targets; when the capital is required,
how much abatement is achieved; and when there is a shortfall, how many permits are required.
The left hand axis is the amount of CO2 abated, the right hand axis the cumulative capital cost. The red line represents a
decline in the allocation of permits by 10% from 2009 to 2020. The blue line is the abatement that can be achieved at
$20/t CO2 derived from the MACC. The black line is emissions under a business as usual (no abatement) scenario.
This shows that in the early years of implementing a price on carbon the business has to buy permits while implementing
the abatement activities. But as the activities are commissioned the business generates a surplus from 2012-2015 that can
be sold or banked
against future years.
- Identified and prioritized AUS $2 billion of investment in all companies for GHG abatement
- Identified energy savings worth AUS $18 million
- Identified production increases of 100,000 slab per annum
- Identified over 1M tonne of profitable CO2 abatement opportunities
- Created strategic roadmap to world’s best practice
