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Safeguard Mechanism –
Review of Production
Variables
BlueScope submission
23 January 2024
BlueScope welcomes the opportunity to make a submission in response to the Federal Government’s exposure draft of the National Greenhouse and Energy Reporting (Safeguard Mechanism) Amendment (Production Variables
Update) Rules (No.2) 2023 (PV Update No.2), including the exposure draft of the amended Safeguard Mechanism document (SGM Document). This submission should be read in conjunction with previous BlueScope submissions on the Safeguard Mechanism (SGM) including the submission “Safeguard Mechanism Reforms: BlueScope submission” dated 24 February 2023 (SGM Submission) and the submission dated December 2023 in response to the Government’s Carbon Leakage Review Consultation Paper released on 13 November 2023 (Carbon
Leakage Submission).
Executive Summary
BlueScope welcomes the Government’s decision to review the production variables (PVs) for iron and steel manufacturing activities with the objective of incentivising the transition to lower emissions intensive production technologies through PVs which are better aligned to potential decarbonisation pathways for steelmakers.
BlueScope supports the general direction of the draft amendments to the National Greenhouse and Energy
Reporting (Safeguard Mechanism) Rule 2015 (SGM Rule) and SGM Document (draft Amendments). However, with elements of the broader SGM policy such as the SGM EBIT guidelines still unresolved, further amendments to the PVs already foreshadowed by the Government, including potentially significant changes to the primary steel production variable involving a cap on the use of cold ferrous feed, and the Carbon Leakage Review not yet concluded, BlueScope is concerned that its submission is being made in the absence of a complete picture of the implications of the SGM for its facilities. This submission is accordingly qualified.
This submission provides a summary of the context in which it is made and a discussion of the positive aspects of the draft Amendments as well as those matters which BlueScope believes require further consideration by the
Government, either because they have the potential to substantively impact upon the fair and effective operation of the SGM in a way that disincentivises decarbonisation, or because there is the opportunity to provide greater clarity to avoid confusion and enhance the operation of the SGM. BlueScope welcomes the opportunity to discuss this submission further with DCCEEW.
1. Context for BlueScope’s submission
1.1 Australia’s largest steel producer
BlueScope is an Australian-headquartered, ASX-listed steel manufacturer, specialising in the production of steel materials, products, systems and technologies. It operates in 16 countries, with approximately 100 sites in
Australia, being a mix of large manufacturing plants, roll-forming facilities and distribution centres. The business specialises in flat steel products, including hot rolled coil, cold rolled coil, plate and value-added metallic coated and painted steel solutions. Its key focus is on higher value, branded products for the building and construction industry, with increasing capability in supplying locally made steel for the renewable energy and defence sectors.
BlueScope's products are recognised leaders in Australia, and include COLORBOND® steel, TRUECORE® steel,
ZINCALUME® metallic coated steel, TRU-SPEC® steel and the LYSAGHT® and FIELDERS® building products.
BlueScope manufactures approximately 3.2 million tonnes of steel annually in Australia, using the Blast Furnace
(BF)-Basic Oxygen Furnace (BOF) method of primary iron and steelmaking. The BF-BOF production route is often referred to as ‘primary’ steelmaking as it creates iron and steel with virgin iron ore as the primary input. Using this production method, iron ores are smelted with coke, limestone and other inputs in a BF to produce virgin iron.
Molten virgin iron and a proportion of cold ferrous feed (CFF), usually in the form of steel scrap, are then converted into steel in a BOF.
BlueScope is the only domestic manufacturer of flat steel products, providing sovereign capability to supply key sectors including building and construction, manufacturing, agriculture, infrastructure, transport and defence.
BlueScope’s flat steel products also have a significant role to play in enabling Australia’s decarbonisation transition infrastructure.
In addition to supplying key domestic sectors, BlueScope exports around of a quarter of its Australian steel production, with volumes varying according to domestic and international market conditions. BlueScope employs approximately 6,700 people in Australia, including around 3,500 people at the Port Kembla Steelworks (PKSW) and adjacent facilities in the Illawarra region of New South Wales. BlueScope’s contribution to New South Wales
1
includes generating a total of 20,000 direct and indirect jobs, $12 billion in output per year and $2.3 billion in household income per year.1
1.2 BlueScope operates in a highly competitive market against producers largely shielded from material carbon costs
BlueScope operates in a highly competitive global market, exporting to the world and competing against imports at home. In 2022, the global steel industry produced just under 1.8 billion tonnes of finished steel, and one in every five tonnes produced was exported2. The Australian steel sector is highly trade exposed. Australia’s crude steel production was 5.8 Mt in 2021-2022 with steel imports of 2.5 Mt and exports of 1.0 Mt3. The steel sector is even more trade exposed when considering the steel contained in imported goods. The World Steel Association estimates Australia’s true steel use is 10.5 Mtpa4, meaning imports account for approximately half of Australia’s true steel consumption.
Australian steelmakers are fundamentally price-takers. BlueScope competes domestically against imports from producers in low-cost jurisdictions, often with higher greenhouse gas emission (GHG) intensity and less stringent environmental standards. GHG emissions from the PKSW are lower than the average of blast furnace emissions from Australia’s major source countries of steel imports (China, Japan, Korea and India)5. Furthermore, steelmakers in jurisdictions with relatively strong climate policy settings, such as the EU and Korea, are shielded from carbon pricing through the allocation of free credits or permits. As a result, almost no sources of imported steel in Australia are currently required to bear material carbon costs.
1.3 BlueScope strongly supports decarbonisation and is committed to reducing its greenhouse gas emissions
BlueScope supports Australia’s 2030 and 2050 GHG targets, consistent with Australia’s Nationally Determined
Contribution under the Paris Agreement. BlueScope has developed a decarbonisation pathway to support delivery of its climate strategy. It has announced a 2050 net zero goal for Scope 1 and Scope 2 emissions across all operations globally, supported by two interim emissions intensity targets for 2030:
A 12 per cent reduction in GHG emissions intensity for its steelmaking operations globally; and
A 30 per cent reduction in GHG emissions intensity for its non-steelmaking activities (such as cold rolling,
metal coating and painting lines).
Both targets are measured against a FY2018 baseline.
Achieving the 2050 net zero goal is highly dependent on several key enablers, including the development of emerging ironmaking technologies, access to affordable, firmed large-scale renewable energy, availability of competitively priced green hydrogen with natural gas enabling the transition, access to appropriate quality and sufficient quantities of economic raw materials and supportive and consistent policy settings.
BlueScope has already delivered Australia’s largest emission reduction from facilities covered by the SGM.
PKSW’s Scope 1 emissions have decreased by 40 per cent (4 Mt CO2e) since 2005, in large part by reducing iron and steelmaking capacity through the closure of a blast furnace in 2011. However, this came at a large cost: a loss of 1,500 direct jobs, $400 million in closure related costs and a reduction in Australian steel exports of approximately 2 to 3 Mtpa.
BlueScope has a strong track record of realising energy efficiency and emissions reduction opportunities. Between
FY2012 and FY2022, the PKSW reduced its Scope 1 emissions per tonne of output from 2.33 t CO2e/t to 1.90 t
CO2e/t raw steel – an 18 per cent decline6. According to data from the World Steel Association, PKSW ranks in the best fifteenth percentile for emissions efficiency of the 56 BF-BOF facilities surveyed globally7. From this position, further reductions from the PKSW will be much harder and more costly to achieve.
1
IRIS Study ‘BlueScope’s Economic Contribution to Australia, NSW and the Illawarra’, January 2023
2
World Steel Association, World Steel in Figures 2023
3
Department of Industry, Science and Resources, Commonwealth of Australia, Resources and Energy Quarterly December 2022, steel imports
4
World Steel Association, Steel Statistical Yearbook 2022, table 58
5
CRU Emissions Analysis Tool, average blast furnace emissions from China, Japan, Korea and India
6
NGERs
7
World Steel Association, CO2 Data Report 2023 (2022 data year)
2
1.4 BlueScope has a significant role to play in enabling Australia’s renewable energy transition
Steel’s role in the larger task of decarbonising the Australian economy will be crucial because it is an essential enabler in the development of renewable energy. Much of the infrastructure that Australia needs to drive the energy transition will be made from steel, including wind towers, solar farms, hydro and transmission infrastructure.
It is estimated that approximately 400,000 tonnes per annum of additional steel will be required for renewable energy and related infrastructure, between now and 2050, to meet Australia's targets based on AEMO NEM forecasting8. Additional steel will also be required to meet Australia's green hydrogen ambitions. As Australia’s largest flat steel producer, BlueScope has a critical role to play in enabling Australia's renewable energy transition.
1.5 BlueScope’s operations are fundamental to sovereign capacity in iron and steelmaking
Domestic iron and steelmaking is core to a vibrant Australian manufacturing sector. Steel is a key input to the construction, engineering, mining and manufacturing sectors. Sovereign iron and steelmaking capacity also supports Australia’s strategic interests including critical infrastructure and defence.
Retaining sovereign iron and steelmaking capacity now is essential if Australia is to play its part in emerging and future low emissions iron and steelmaking. Sovereign production helps guard against loss of supply in potential periods of geopolitical instability and dislocation of global supply chains, as seen in recent years. Loss of this capability will hinder the renewable energy transition; on the other hand, achieving this transition while supporting sovereign capacity in iron and steel making can unlock strategic, economic and environmental benefits for
Australia, including, as discussed in BlueScope’s Carbon Leakage Submission, development of a global scale low emissions Hot Briquetted Iron (HBI)9 export industry in Australia.
2. Response to the exposure draft of the National Greenhouse and
Energy Reporting (Safeguard Mechanism) Amendment (Production
Variables Update) Rules (No.2) 2023
2.1 BlueScope supports amendments to the Safeguard Mechanism that help enable the most prospective decarbonisation pathways for primary steel producers
The proposed reformulation of the iron and steelmaking PVs is a positive step towards supporting and incentivising the transition to lower emissions intensive production technologies for steelmakers, as these become technically and commercially viable in the Australian context. The redrafted PVs in the draft Amendments are better aligned to potential decarbonisation options for Australian steelmakers, as discussed at length in BlueScope’s SGM and
Carbon Leakage submissions.
The availability of associated international best practice emissions intensity benchmarks for some production variables assists with the task of assessing potential future decarbonisation investment opportunities, providing additional certainty for businesses investing in long-term and capital-intensive assets.
2.2 The draft Amendments do not resolve all the outstanding Safeguard Mechanism uncertainties
2.2.1 Elements of the Safeguard Mechanism, and the Government’s broader decarbonisation policy framework, remain uncertain, making it difficult to assess the full implications of the draft Amendments
The broader decarbonisation policy framework needs to enable decarbonisation whilst simultaneously maintaining a vibrant and competitive steel industry. Government policy, including the SGM, a potential Carbon Border
Adjustment Mechanism (CBAM), and funding support, must be designed both to deliver Australia’s decarbonisation commitments, and to support Australian manufacturing to transition.
The final operation and impact of the SGM is dependent on the interaction of a range of policy elements including the final content of the SGM Rule’ (including documents incorporated into or required to interpret the SGM Rule, such as the SGM document and the foreshadowed SGM EBIT guidelines) and the design of any future CBAM.
With this incomplete policy framework, and with further amendments to the PVs already foreshadowed by the
Government, including potentially significant changes to the primary steel production variable involving a cap on
8
Australian Energy Market Operator, 2022 Integrated System Plan for the National Electricity Market (June 2022)
9
Hot Briquetted Iron is a compacted form of Direct Reduced Iron designed for shipping.
3
the use of cold ferrous feed, BlueScope is concerned that its submission is being made in the absence of a complete picture of the implications of the SGM for its facilities. BlueScope’s submission is accordingly qualified.
2.2.2 The draft Amendments arising from this review extend outside the scope of an update to the PVs to matters which go to the design of the SGM
Eligibility for SMCs in the first year of a TEBA determination
Ensuring financial capacity to support the immense cost of transition of capital intensive, hard to abate, trade exposed industries should be a key principle of the broader policy framework, particularly if Australia is to retain a vibrant and enduring manufacturing industry.
The review includes an amendment preventing facilities from being eligible for SMCs in the first financial year of a
TEBA determination. BlueScope is evaluating the potential impact of this proposed change and requests further engagement with DCCEEW about the rationale for this proposed amendment.
2.3 The proposed amended SGM Rule gives rise to several key issues of concern
2.3.1 The removal of the definition of “integrated iron and steel manufacturing” from clause 36 and the replacement of the integrated iron and steel manufacturing PV with a primary steel PV confuses the distinction between primary and secondary steel production, with potentially unintended consequences for domestic steel producers
Currently there are two main steel production processes.10 As summarised earlier in this submission, the BF-BOF production route, often referred to as ‘primary’ steelmaking, creates iron and steel with virgin iron ore as the primary input. Using this production method, iron ores are smelted with coke, limestone and other inputs in a BF to produce virgin iron. Molten virgin iron and a proportion of CFF, usually in the form of steel scrap, are then converted into steel in a BOF.
An alternative way of making steel is via melting CFF in an electric arc furnace (EAF), often referred to as
‘secondary’ steelmaking. CFF includes steel scrap, Direct Reduced Iron (DRI), of which HBI is a subset, flat iron and pig iron.
It is critical to understand that while secondary steelmaking is often referred to as CFF steelmaking, the use of CFF is also fundamental to the primary steel production process. Increasing the use of CFF in the primary steelmaking process at BlueScope’s PKSW represents one of the facility’s most prospective near-term emissions intensity reduction opportunities. 11
The previous definition of integrated iron and steel making specifically recognised that the primary steelmaking process could involve use of cold ferrous feed, including pig iron, flat iron and ferrous scrap. The proposed PV for primary steel, which will replace the PV for integrated iron and steelmaking, does not contain an equivalent phrase, without which there is a risk that parties involved in the process of emissions-intensity determination, including auditors and the Clean Energy Regulator (CER), will take different approaches to the allocation of products to the new PVs, creating complexity and potentially distorting an accurate picture of BlueScope’s production against relevant PVs.
Table 1 below suggests amendments to a number of provisions which are designed to more clearly delineate between the two types of steelmaking.
2.3.2 The updated emission intensity (EI) figures proposed in the draft Amendment do not account for recent steelmaking emission reporting changes
The CER recently advised of a change to the National Greenhouse and Energy Reporting (NGER) reporting requirement for primary steel producers requiring them to report the emissions contribution from carbon in iron ore in facility emissions. This new requirement applies for the 2023-24 reporting year and beyond.
10
International Energy Agency, Iron and Steel Technology Roadmap – Towards More Sustainable Steelmaking, Oct 2020
4
With the SGM PV default EIs being set by reference to historically reported FY13-17 facility emissions, this change creates a misalignment between the basis of emissions reporting underpinning the calculation of the default iron and steelmaking PV related EIs and the basis for ongoing emissions reporting. This misalignment results in adverse outcomes for primary steelmakers.
BlueScope recognises that DCCEEW does not yet have the complete historic emissions data required to update default EIs to adjust for this reporting change. BlueScope has provided DCCEEW with indicative data and will provide DCCEEW with more detailed data by the end of January 2024. BlueScope requests that once DCCEEW has this data, it updates the relevant iron and steelmaking PV default EIs to adjust for this reporting change.
2.3.3 The amended PVs do not fully recognise the broader consequences of closing coke making as part of a production technology step change to decarbonise primary steelmaking at PKSW
Coke production, including export coke, is integral to the economics and broader operation of PKSW. Coke is a key input to the BF, and in-house production of coke ensures a secure supply of technically consistent, high quality coke is available to support stable and efficient operation of the BF. Sale of surplus coke also helps underpin the economics of the PKSW facility.
The waste gases from the production of coke are captured and utilised as an important input to other processes including to produce steam, generate electricity and heat furnaces.
A key objective for government in making the draft Amendments is to ensure the production variable definitions support incentives for decarbonisation. While the draft Amendments increase support for the decarbonisation of primary steelmaking, they do not fully recognise the overall contribution of coke production to the economics of integrated steel production.
The proposed change to the design of the production variables will enable primary steelmakers who shut their coke ovens as part of transitioning away from BF based production to alternative lower emissions intensive primary production processes to retain the component of their baseline associated with producing coke for steelmaking, but not the component of their baseline associated with the production of coke for export sale.
BlueScope requests that where coke production at a primary steelmaking facility ceases as part of a step change that transitions a facility from BF-BOF based steelmaking to an alternative lower emissions primary steel production technology, the baseline contribution from all coke making activities, including coke making for export sales from the facility, be retained in the emissions baseline for the facility. Such an approach would better recognise the overall impact of ceasing coke production and better incentivises the investment in large decarbonisation projects.
2.3.4 The change restricting scrap use under a primary steel PV, foreshadowed as part of May 2024 amendments, may inhibit a prospective decarbonisation pathway
Government has advised that further changes will be made to the primary steelmaking PV as part of a further review in May 2024 which will place an upper limit on the proportion of scrap that can be utilised in primary steel production under the primary steel PV.
While the implications of the foreshadowed change remain unclear, BlueScope has concerns about any change that may inhibit a prospective decarbonisation pathway for PKSW. As increased CFF use in primary steel making provides BlueScope’s most prospective near-term emission intensity reduction opportunity, BlueScope requests that there be no practical limit placed on the use of CFF in primary steelmaking as part of this upcoming review.
2.3.5 Other key issues of concern
Table 1 below summarises other key issues which BlueScope requests be addressed by DCCEEW to ensure the fair operation of the amended SGM in a way which incentivises decarbonisation. Drafting changes have been suggested where considered appropriate.
2.4 Additional detailed commentary and drafting suggestions
BlueScope acknowledges that issues dealt with in the draft Amendments are complex and that DCCEEW has been working to tight timelines in providing the draft Amendments for review. BlueScope appreciates the time that it has been given to digest the proposed changes so that it can consider their implications.
5
There are some matters in respect of which BlueScope considers there to be an opportunity to provide greater clarity and improve the workability of the amended SGM. Table 2 below deals with issues which are generally not matters of critical principle, but which require addressing in order to ensure the mechanics of the amended SGM
Rule operate as intended.
6
Table 1 – Key drafting and other issues
Topic Ref. ‘SGM Ref. ‘SGM Concern Proposal
Rule’ Document’
extract
As currently drafted, section 14A requires sections 39 BlueScope's suggested amendments to section 14A to
Additional s14A
and 44 of Schedule 1 to be read and applied subject to provide the necessary clarity are set out in the Appendix.
requirements for eight separate amendments. It is extremely difficult to emissions understand the effect of these amendments when the intensity amended form of sections 39 and 44 is not set out in full.
determination The reader is required to flick back and forth between application section 14A and Schedule 1 to understand which specifying primary aspects of sections 39 and 44 of Schedule 1 are retained steel as and which are amended.
production Further, a number of the terms and phrases used in variable sections 14A(4) and (5) are unclear. In particular,
BlueScope considers the following italicised terms are
ambiguous in their meaning: 'For the definition of' the
primary iron (steelmaking) PV / ferrous feed
(steelmaking) PV 'assume' section 39 / 44 of Schedule 1
'also applies as if the following modifications were made
to that section'.
Proposed section 14A of the Safeguard Rule does not BlueScope submits that subsection 14A(1) should be
Additional s14A
provide the responsible emitter with an option whether to amended to provide the responsible emitter with an option requirements for provide the information required for an EID application to not include the information required by section 14A in its emissions for primary iron and CFF steelmaking. Whenever an application for an EID for primary steel (and therefore not intensity application for an EID under section 14 specifies primary obtain an EID for primary iron and CFF steelmaking). Such determination steel as a PV for the facility, this information must be an amendment would be consistent with the purpose of application provided. proposed section 14A, which is to provide a benefit to specifying primary This requirement imposes an additional and potentially facilities without imposing an additional burden.
steel as unnecessary burden on responsible emitters, for Subsection 19A(1) should be amended to provide that the production example where there is no intention that the facility will Regulator is only required to determine a facility-specific variable undertake primary iron or CFF steelmaking activities emissions intensity number for primary iron and CFF
7
within the next year and therefore does not require an steelmaking where this has been requested by the
EID for these PVs. responsible emitter.
BlueScope's suggested amendments to subsections
14A(1) and 19A(1) to address this issue are set out in the
Appendix.
This definition as currently drafted is broad enough to To clearly distinguish between primary and second
Definition of Schedule 1 Pg 8
capture carbon steel produced as part of the primary steelmaking, BlueScope submits that the words 'except as manufacture of s36(1) steel manufacturing process where cold ferrous feed is produced as part of carrying on the primary steel carbon steel from an input to that process. manufacturing activity' should be included directly after 'the cold ferrous feed The definition is currently only used within the definitions following' in this definition.
activity of 'hot-rolled long products activity' and 'hot-rolled flat
products activity'. However, a similar phrase ('the
(need for clear
manufacture of carbon steel products from cold ferrous distinction feed activity) is used in other sections of Schedule 1, between primary including significantly in section 44(2) of Schedule 1. If and secondary the intent is for the defined term 'manufacture of carbon steelmaking) steel from cold ferrous feed activity' to be applied in
section 44, the definition needs to be amended so that it
excludes carbon steel produced as part of the primary
steel manufacturing process.
The proposed new EI figures differ from existing despite That the Lime and Coke EIs remain as per previous.
Lime and Coke Schedule 1
there being no apparent basis for this change. It is emission factors s37(4) and expected that these figures are calculated using the
s38(4) same inputs and same methodology as previous, so the
outputs should be the same.
Lime EI: New 0.762, Old 0.780
Coke EI: New 0.466, Old 0.467
Section 39 (2) defines primary iron production as the BlueScope suggests that the words ‘including cold ferrous
Primary iron Schedule 1 Pg 11-13
activity of the physical and chemical processing of iron feed’ be added after the term ‘iron containing feeds’.
production s39(2) containing feeds into a crude iron product suitable for variable export from the facility. The term ‘iron containing feeds’ In relation to the ‘Inclusions’ and ‘Exclusions’ for the
(need for clear is not defined. BlueScope’s proposed amendment would primary iron PV in the SGM Document, BlueScope
extend the definition, including to make clear that iron submits that: distinction
containing feeds may include CFF (although for o the statement under 'Inclusions' should be between primary BlueScope this is not the normal practice). amended to read: 'iron production: for the purpose and secondary
of calculating a facility-specific emissions intensity steelmaking; number for this production variable based on clarity regarding information provided in relation to the primary iron applications under (steelmaking) production variable in accordance
8
section 14A of the In addition, BlueScope notes that the SGM Document with section 14A of the Safeguard Rule, emissions
SGM Rule) includes the following statements in relation to the from the production of molten iron are included'.
primary iron PV: o the statement under 'Exclusions' should be
amended to read: 'For the purpose of calculating a
o under the list of ‘Inclusions’ for this PV, ‘iron facility-specific emissions intensity number for this
production: for the purpose of calculating a facility- production variable based on information provided
specific emissions intensity value when a facility is in relation to the primary iron (steelmaking)
engaged in the primary steel production activity, production variable in accordance with section 14A
emissions from the production of molten iron are of the Safeguard Rule, emissions from the
included'; production of steel from molten iron are excluded.'
o under the list of 'Exclusions' for this PV, 'For the
purpose of calculating a facility-specific emissions
intensity value when a facility is engaged in the BlueScope also notes that this statement under
primary steel production activity, emissions from the 'Exclusions' should be a separate dot point as it is
production of steel from molten iron are excluded'. unrelated to the preceding exclusion, being 'processes
included in (or apportioned to) another production
variable’.
The purpose of these statements is not sufficiently
clear. However, BlueScope expects that they are
intended to clarify that for the purpose of an application
for an emissions intensity determination to which
proposed section 14A applies, emissions from the
production of molten iron at a facility are relevantly
associated with the primary iron (steelmaking) PV,
whereas emissions from the production of steel from
molten iron are not. That said, BlueScope considers
that these statements, and their purpose, require
greater clarification.
While PKSW typically produces all the coke it requires To enable the continuation of the historic practice of the
Import Coke Schedule 1
for steel production within the PKSW facility, it does on occasional use of a small proportion of imported coke, adjustment factor s39(4) and rare occasions utilise imported coke to supplement in including where this might be required to help manage
s41(4) house production. operational disturbances, it is proposed that the coke
Imported coke was used during the FY13-17 reference adjustment factor only applies where the quantity of
period for the calculation of the industry average EIs. imported coke exceeds 5% of the total quantity of coke
However, historic emissions for this period have not consumed for the production of primary iron / primary
been normalised using the proposed coke adjustment steel.
9
figure ahead of the assessment of the PV industry
average EIs.
The formula defining the calculation of the quantity of That the formula for the calculation of the tonnes of
Import Coke Schedule 1
products produced includes Qp and Qi, being the ‘metallic iron products’ and tonnes of ‘continuously cast adjustment factor s39(4) and quantity produced using imported coke, and the quantity carbon steel products and ingots of carbon steel’ be
- Unmeasurable s41(4) produced not using imported coke. updated such that, where coke is utilised, Qp and Qi be variables in the These quantities are not measured directly in the calculated by reference to the consumed ratio of imported calculation of production process as coke sources are blended in the versus facility produced coke, multiplied by the total iron or production manufacturing process. steel production volume (as appropriate).
quantities. Where coke is utilised, Qp and Qi will necessarily be
calculated by reference to the consumed ratio of
imported versus facility produced coke, multiplied by the
total iron or steel production volume (as appropriate).
There is a need to clarify the inputs to the equations in BlueScope’s suggestion for addressing this potential
Import Coke Schedule 1 Primary
sections 39(4) and 41(4) of Schedule 1, which are ambiguity is set out below. The drafting below does not adjustment factor s39(4) and iron drafted somewhat ambiguously and may give rise to presume that DCCEEW will accept the requests made
- calculation s41(4) production differing interpretations. above in relation to the import coke adjustment factor (both
variable By way of illustration, BlueScope understands from the that (a) the import coke adjustment factor only applies
definition example provided in section 39(4) that only tonnes of
where the quantity of imported coke exceeds 5% of the
(pg 11), metallic iron products that meet the conditions specified
total quantity of coke consumed, and (b) the formula for
primary in section 39(1) are to be included in the calculation of
tonnes of metallic iron products for the purposes of the the calculation of the tonnes of ‘metallic iron products’ and
steel
primary iron production variable (most relevantly, only tonnes of ‘continuously cast carbon steel products and
production
tonnes of metallic iron products that are exported from ingots of carbon steel’ be updated such that, where coke is
variable
the facility). However, this is not abundantly clear on the utilised, Qp and Qi reflect the proportion of imported
definition
face of section 39(4), which refers to the quantity of versus facility produced coke).
(pg 13) metallic iron products 'produced' – this could be read as If DCCEEW accepts the requests above, the drafting
referring to all metallic iron products produced (eg, below will require amendment to introduce the threshold
including iron which is not exported from the facility but referred to in (a) and the proportionality referred to in (b).
used in the primary steel production process).
However, even if DCCEEW does not accept BlueScope’s
request regarding the threshold, BlueScope requests its
consideration of the drafting below to address the potential
ambiguity highlighted in this comment.
This potential ambiguity can be addressed by inserting
additional drafting in section 39(4) (and the equivalent
passage of the SGM Document), as shown in bold below:
…
10
Qp is the quantity of metallic iron products, in
tonnes, that meet the requirements of subsection
(1) and are not produced using coke oven coke
imported into the facility, excluding any gangue
within the metallic iron products.
Qi is the quantity of metallic iron products, in
tonnes, that meet the requirements of subsection
(1) and are produced using coke oven coke
imported into the facility, excluding any gangue
within the metallic iron products.
…
BlueScope considers that similar amendments should be
made to section 41(4) (and the equivalent passage in the
SGM Document), which pertains to the primary steel
production variable, for the same reasons as stated above.
Proposed additional drafting is shown in bold below:
…
Qp is the quantity of continually cast carbon steel
products and ingots of carbon steel that meet the
requirements of subsection (1) and are not
produced using coke oven coke imported into the
facility.
…
Otherwise, the inputs to Qp could be read as including
tonnes of continually cast carbon steel products and
ingots of carbon steel that are produced as part of the
CFF activity.
11
There is no common industry meaning for gangue. BlueScope submits that the ‘tonnes of metallic iron’
Adjustments to Schedule 1 Pg 12
Gangue, under some definitions, includes residual relevant to S1 39(4) should be determined by reference to iron export s39(4) the mass of the productive elements in the primary iron
unreduced oxides which are fundamental to downstream quantity based on processing of DRI and are often added to achieve product (e.g. include the mass of iron (Fe), carbon (C), gangue targeted specification (e.g. CaO and MgO). They are a calcium oxide (CaO) and magnesium oxide (MgO)).
core metallurgical component of DRI. Further, given that gangue has a technical meaning which
is not necessarily obvious, BlueScope suggests that a
definition of gangue should be inserted in section 36 of the
SGM Rule and general definitions section of the SGM
Document.
The emissions intensity of Iron ore pellet production is That the Iron ore pellet PV be scoped to relate to the mix
Iron ore pellet PV Schedule 1
largely determined by the chemistry of the iron ore being of input ores being utilised by the Australian facilities on
s40(4) and processed. Pelletising iron ores that predominately which the new default and best practice emissions
s40(5) contain magnetite requires considerably less energy than intensities are based.
iron ores predominately containing hematite.
Current domestic production of iron ore pellet
predominately processes magnetite containing ores.
Prospective future steelmaking decarbonisation
pathways include the utilisation of DRI produced from
pelletised hematite containing iron ores.
Basing best practice emissions intensity value for iron
ore pellets on existing Australian industry production of
pellets from magnetite containing ores may disadvantage
future new pelletising facilities processing hematite ores.
Primary steel Schedule 1 Pg 13-14 BlueScope makes the following observations in respect of BlueScope submits that: production s41(2) this production variable:
Subsection 41(2) of the SGM Rule be amended by adding variable
The metric is stated as applicable to a facility that the words ‘including cold ferrous feed’ after the words ‘iron
(need for clear ‘conducts the activity of producing continuously cast feed material’ and that the same amendment be made in distinction carbon steel products and ingots of carbon steel through paragraph 2 of the PV definition in the SGM Document.
between primary the physical and chemical transformation of iron feed The SGM Rule and SGM Document should be amended and secondary material into crude carbon steel products and hot-rolled to ensure that consistent terminology is used. Given that
carbon steel products.’ The term ‘iron feed material’ is the definition of primary steel manufacturing activity uses steelmaking)
not defined and BlueScope is concerned that it could be the phrase 'continuously cast carbon steel products',
interpreted as excluding cold ferrous feed. BlueScope submits that this phrase should be used
The SGM Rule and SGM Document refer to 'continually instead of 'continually cast carbon steel products'.
cast carbon steel products' and 'continuously cast carbon The more precise language used in the equation in
steel products' interchangeably in the context of the subsection 41(4) should be replicated in the SGM
primary steel production variable. These terms could be Document, to reduce the risk of uncertainty associated
12
interpreted as being intended to have different meanings, with different equations for calculating tonnes of
noting that as a general of statutory interpretation, where continuously cast carbon steel products and ingots of
the drafter has chosen to use different terms they are carbon steel.
generally assumed to have intended a different meaning.
The equation for tonnes of continually cast carbon steel
products and ingots of carbon steel differs between
subsection 41(4) and the definition in the SGM Document.
Whereas subsection 41(4) refers to 'the quantity of
continually cast carbon steel products and ingots of carbon
steel', the SGM refers to 'the quantity of primary steel'
('primary steel' is not defined).
The Explanatory Memorandum accompanying the draft BlueScope requests that DCCEEW determine a default
Production Schedule 1
Amendments states on page 15, in relation to the new emissions intensity number for the two new hydrogen variables for s99 and sections 99 and 100 in Schedule 1, that “A default value variables.
gaseous and s100 is not required given there is no existing Australian liquified hydrogen facility producing hydrogen as an output.”
This is not accurate. BlueScope’s PKSW facility includes
a contractor operation which produces key gases for the
PKSW as well as hydrogen for third party use. Emissions
associated with the production of hydrogen have been
allocated and reported by BlueScope in accordance with
NGERs reporting requirements.
While the quantities of hydrogen produced at the PKSW
facility have been modest to date, this may change in
future years.
In the absence of a default emissions intensity, from
FY2030 if not earlier, BlueScope will be penalised if it
applies for a facility specific emissions number for the
hydrogen PV – that is, from FY2030 onwards, if a facility
specific emissions number but no default emissions
intensity number applies in relation to a PV for a facility,
the baseline emission number obtained by the
application of section 11 for that PV will be zero.
13
Table 2 - Other comments and drafting suggestions
Topic Ref. ‘SGM Ref. ‘SGM Concern Proposal
Rule’ Document’
extract
1 The introductory paragraph to the steel o BlueScope submits that these bullet
Steel manufacturing Pg 8 points should be deleted.
manufacturing section contains the following
overview statements:
o Primary iron and steel manufacturing refers
to the processing of raw materials into an
iron or steel product.
o Cold ferrous feed steel manufacturing
refers to the production of steel from cold
ferrous feed.
o These references are not entirely consistent with
the defined terms of 'primary steel
manufacturing activity' and 'manufacture of
carbon steel products from cold ferrous feed
activity', which are more precise. There is a risk
that including these bullet points creates
confusion and ambiguity as to the meaning of
similar terms.
o In addition, cold ferrous feed is an integral input
into the primary steel manufacturing process. It
is therefore not accurate to describe primary
steel manufacturing as being the processing of
raw materials only. The description of cold
ferrous feed steel manufacturing as being the
production of steel from cold ferrous feed is also
problematic as this could potentially capture
steel produced via an integrated steel
manufacturing process where cold ferrous feed
is used as an input.
14
Topic Ref. ‘SGM Ref. ‘SGM Concern Proposal
Rule’ Document’
extract
2 Pursuant to s12(2)(a), a production variable for a BlueScope submits that a new subsection
Definition of historical s12(2)(a)
facility is only a historical production variable 12(6) should be inserted in the SGM Rule as
production variable where it was 'applicable to the facility, in follows: 'For the avoidance of doubt, for the
accordance with Schedule 1, at any time during purpose of section 12(2)(a), a production
a historical financial year'. BlueScope variable was applicable to the facility, in
understands the intention is that a PV will be accordance with Schedule 1, at any time
taken to be 'applicable to a facility' even in during a historical financial year if the
circumstances where, for example: circumstances in which the production
variable is applicable (as set out in
o the activities/operations at the facility Schedule 1) existed during the historical
during the historical financial year meant financial year, whether or not:
that the circumstances in which that PV (i) emissions associated with the
applies (as set out in Schedule 1) were production variable were
satisfied, but the facility did not attribute attributed to that production
emissions to that PV for any historical variable in any historical financial
financial year (for example, as permitted year; or
by s16(3) where the emissions were a (ii) the production variable was
minor emissions source); or included in Schedule 1 in the
o the activities/operations at the facility relevant historical financial year.'
during the historical financial year meant
that the circumstances in which that PV
applies (as now set out in Schedule 1)
were satisfied, but that PV was not listed in
the Safeguard Rule at that time.
However, this is not clear on the face of the
SGM Rule and there is a risk that 'applicable to
the facility' could be incorrectly interpreted as
requiring that the facility had in fact attributed
emissions specifically to that PV in a historical
financial year. BlueScope therefore considers
that there is a need to clarify the meaning of
'applicable to the facility' in the SGM Rule.
15
Topic Ref. ‘SGM Ref. ‘SGM Concern Proposal
Rule’ Document’
extract
3 Increasingly as part of decarbonisation, To ensure the definition is accurate in
Definition of coke oven Schedule 1 Pg 9
materials other than coal (such as plastic) are practice, BlueScope proposes that the
coke s36(4) being carbonised to produce coke. However, definition of ‘coke oven coke’ be amended
the definition of coke oven coke excludes by adding the word 'primarily’ after
product obtained from carbonisation of materials ‘carbonisation’.
other than coal.
4 BlueScope’s comment above regarding the use BlueScope suggests that section 37(2), and
Coke oven coke Schedule 1 Pg 9
of other materials in the production of coke oven the corresponding passage in the SGM
production variable s37(2) coke applies equally to this subsection. Document, should be amended as follows:
definition In addition, BlueScope considers that the text 'The metric in subsection (1) is applicable to
'through the coke oven coke manufacturing a facility that conducts the activity of
process' is not necessary as it effectively carbonisation primarily of coal (principally
repeats the definition of 'coke oven coke coking coal).’
manufacturing activity'.
5 The terms 'export' and 'exported' are commonly To mitigate the risk of ambiguity regarding
'Export' and 'exported' Schedule 1 Pg 9–14
used to refer to the process of sending goods to the meaning of these terms, BlueScope
s37(1), another country for sale. However, these terms suggests that the following definition should
‘Import’ and ‘imported’
s38(1), are used throughout the SGM Rule and SGM be inserted at section 36 of Schedule 1 of
s39(1), Document with the apparent intention of the SGM Rule:
s39(2), describing the process of sending goods 'off-site'
s39(4), s40(1) (ie, where products produced at a facility are 'In this Part, export means to transfer to a
and s41(4) sold to a third party located off-site). place outside the facility' and ‘import means
Similarly, the terms ‘import’ and ‘imported’ to receive from a place outside the facility’
commonly refer to the process of receiving
goods from another country. As above, these
This definition should also be repeated in the
terms seem to be used throughout the SGM
general definitions in the steel manufacturing
Rule and SGM Document with the intention of
section in the SGM Document.
describing the process of receiving goods from a
third party site or facility.
6 The SGM Rule and SGM Document appear to To address this, BlueScope submits that
Primary steel production Schedule 1 Pg 8, 10, 12-
use the terms 'primary steel production activity' references to 'primary steel production
activity and primary steel s36(2), s36(3) 17 (which is not defined) and 'primary steel activity' should be replaced with 'primary steel
manufacturing activity s38(2), manufacturing activity' (which is defined in manufacturing activity' to ensure that the
section 41(3)) interchangeably. This creates
16
Topic Ref. ‘SGM Ref. ‘SGM Concern Proposal
Rule’ Document’
extract
s42(2), risks of ambiguity in the meaning of various relevant activity has a clear and consistent
s43(2), s44(1) operative provisions. meaning.
7 The SGM Document contains various BlueScope suggests that:
Estimated emissions Pg 6, 11, 21
references to 'Scope 1 emissions from the
intensity value and following processes are included within the o the phrase 'estimated emissions
benchmark emissions production variable … other incidental, ancillary intensity value' should be replaced
intensity value or supporting processes which are not included with 'facility-specific emissions
in another default or estimated emissions intensity number'.
intensity value' (emphasis added). The term o The phrase ‘benchmark emissions
'estimated emissions intensity value' is not intensity value’ should be replaced
defined in the SGM Rule or SGM Document and with ‘best practice emissions intensity
it is unclear what this means. BlueScope number’.
assumes the term is meant to refer to a facility- o DCCEEW clarify whether the
specific emissions intensity number. inclusions for other PVs in the SGM
Document should also refer to the
best practice emissions intensity
In addition, the inclusions for the new hydrogen number following the reference to
PV include ‘other incidental, ancillary or ‘other incidental, ancillary or
supporting processes which are not included in supporting processes.’
another default, facility specific or benchmark
emissions intensity value’ (emphasis added).
The term ‘benchmark emissions intensity value’
is not defined. BlueScope assumes the term is
meant to refer to a best practice emissions
intensity number. Also, the reference to a
benchmark/best practice emissions intensity
value/number seems to appear only in the
inclusions for the new hydrogen PV in the SGM
Document, but not in the inclusions for any other
PV in the SGM Document, whether or not they
have a best practice emissions intensity
number. It would be helpful to understand
whether this is intentional or not.
17
Topic Ref. ‘SGM Ref. ‘SGM Concern Proposal
Rule’ Document’
extract
8 In addition to the comments in table 1 regarding BlueScope considers that this specific phrase
Primary iron production Schedule 1 Pg 11
this PV, the meaning of 'suitable for export from would benefit from greater clarification.
variable s39(2) a facility' in section 39(2) is not clear, and may Section 39(1) refers to products that are
be interpreted in various ways (eg, 'able to be exported from the facility and are of saleable
transported from the facility' or 'of a quality quality; BlueScope suggests that the phrase
suitable or capable of being sold'). is amended to: 'product of saleable quality
that is exported from the facility'.
9 Sections 39(4) and 41(4) appear to contain an The cross-references should be amended to
Examples in primary iron Schedule 1 Pg 12–14
incorrect reference to section 40(1) within the section 39(1) and 41(1) in the case of the
production variable s39(4) and 'Example', as follows: '…products that meet the primary iron production variable and primary
definition and primary s41(4) conditions specified in subsection 40(1)'. The steel production variable, respectively.
steel production variable same incorrect cross-reference also appears in In addition, the 'Example' at section 41(4)
definition the SGM Document. should be amended to remove the reference
Further, the 'Example' provided following section to carbon steel produced using an electric
41(4) refers to tonnes of carbon steel produced arc furnace process.
using an electric arc furnace process that does
not use coke oven coke, and appears to suggest
that this product would fall within the primary
steel PV, whereas carbon steel produced using
an electric arc furnace would in fact fall under
the continuously cast carbon steel products and
ingots of carbon steel (manufacture of carbon
steel products from cold ferrous feed) PV.
10
Hot-rolled long products Schedule 1 Pg 8, 14–16 BlueScope makes the following observations in BlueScope submits that:
production variable and respect of both production variables:
s42(1), the production variable definition in
hot-rolled flat products
s42(2), s43(1) In subsections 42(1) and 43(1), the production subsection 42(1) should instead refer to
production variable
and s43(2) variable definitions for hot-rolled long products the 'hot-rolled long products activity' and
(primary steel) and hot-rolled flat products refer to the 'hot- subsection 43(1) should refer to the 'hot-
rolled carbon steel long products activity' and rolled flat products activity' (ie, removing
'hot-rolled carbon steel flat products activity', the references to 'carbon steel').
respectively. This is inconsistent with the BlueScope submits that equivalent
defined terms of 'hot-rolled long products' amendments should also be made to the
activity and 'hot-rolled flat products' activity in SGM Document.
sections 36(2) and (3) and the general
18
Topic Ref. ‘SGM Ref. ‘SGM Concern Proposal
Rule’ Document’
extract
definitions on page 8 of the SGM Document subsection 42(2) should be amended as
and could therefore give rise to ambiguity as to follows: 'The metric in subsection (1) is
whether these sections are intended to refer to applicable to a facility that:
the same activity. (a) conducts the hot-rolled long
Subsection (2) of each section states that the products activity; and
metric in subsection (1) is applicable to a (b) produces hot-rolled long products
facility that conducts: (a) the hot-rolled long (or where the products are
flat, as applicable) products activity; and (b) the manufactured from carbon steel
primary steel production activity. This provision produced as part of carrying on
could be incorrectly interpreted as suggesting the primary steel manufacturing
that the production variables apply to any activity at the facility'.
facility that conducts both activities in isolation, Similarly, subsection 43(2) should be
rather than applying where the hot-rolled amended as follows: 'The metric in
long/flat products are manufactured from subsection (1) is applicable to a facility
carbon steel produced by the primary steel that:
manufacturing activity. (a) conducts the hot-rolled flat
In the SGM Document, the 'Inclusions' for both products activity; and
production variables encompass 'the (b) produces hot-rolled flat products
component of emissions from the activity of where the products are
primary steel manufacturing that is attributable manufactured from carbon steel
to the production of continuously cast carbon produced as part of carrying on
steel products'. The reference to the primary the primary steel manufacturing
steel manufacturing activity appears to be an activity at the facility'.
error. BlueScope submits that equivalent
In the SGM Document, the 'Exclusions' for both amendments should also be made to the
production variables do not expressly refer to
SGM Document.
emissions from processes associated with the
hot-rolled long (or flat, as applicable) products the 'Inclusions' for hot-rolled long products
activity where the products are manufactured should be amended in the SGM Document
from carbon steel produced by the manufacture as follows: 'the component of emissions
of carbon steel products from cold ferrous feed attributable to the production of hot-rolled
activity. BlueScope considers that expressly long products, where the products are
excluding such emissions would provide manufactured from carbon steel produced
additional clarity. as part of carrying on the primary steel
manufacturing activity at the facility, by…'.
Similarly, the 'Inclusions' for hot-rolled flat
19
Topic Ref. ‘SGM Ref. ‘SGM Concern Proposal
Rule’ Document’
extract
products should be amended as follows:
'the component of emissions attributable to
the production of hot-rolled flat products,
where the products are manufactured from
carbon steel produced as part of carrying
on the primary steel manufacturing activity
at the facility, by…'.
for clarity, an additional exclusion should
be added to the 'Exclusions' in the SGM
Document for both production variables.
For hot-rolled long products, the exclusion
should read: 'production of hot-rolled long
products where the products are
manufactured from carbon steel produced
as part of carrying on the manufacture of
carbon steel products from cold
ferrous feed activity at the facility'.
For hot-rolled flat products, the exclusion
should read: 'production of hot-rolled flat
products where the products are
manufactured from carbon steel produced
as part of carrying on the manufacture of
carbon steel products from cold
ferrous feed activity at the facility'.
11 For the hot-rolled long products (primary steel), To address this, BlueScope suggests that
Scope 1 emissions Pg 15–16, 18,
hot-rolled flat products (primary steel), hot-rolled 'activity boundary' should be replaced with
within the activity 19 long products (cold ferrous feed) and hot-rolled 'production variable', for clarity. This would
boundary (various steel flat products (cold ferrous feed) production be largely consistent with the drafting in
manufacturing variables, the 'Inclusions' states that 'Scope 1 the remainder of the steel manufacturing
production variables) emissions from the following processes are section of the SGM Document.
included within the activity boundary'
(emphasis added). BlueScope considers that
the reference to the 'activity boundary' may
create uncertainty as to whether emissions are
20
Topic Ref. ‘SGM Ref. ‘SGM Concern Proposal
Rule’ Document’
extract
included within the relevant production variable
as opposed to, for example, the facility
boundary, given that the term 'activity boundary'
is not defined and is not used consistently in
each PV.
12
Continuously cast Schedule 1 Pg 16–18 BlueScope makes following observations in respect BlueScope submits that:
carbon steel products s44 of this PV:
the production variable in the SGM
and ingots of carbon
the SGM Document describes this PV as Document should be renamed for
steel (manufacture of
'Continuously cast carbon steel products and consistency with the SGM Rule, to
carbon steel products read: 'Continuously cast carbon steel
ingots of carbon steel (cold ferrous feed)', which
from cold ferrous feed) appears to be an error and is inconsistent with products and ingots of carbon steel
production variable how the PV is described in the SGM Rules. (manufacture of carbon steel products
the SGM Document includes the following from cold ferrous feed)'.
statements in respect of the continuously cast the statement under 'Inclusions'
carbon steel products and ingots of carbon steel should be amended in the SGM
(manufacture of carbon steel products from cold Document to: 'steelmaking: for the
ferrous feed) PV: purpose of calculating a facility-
o under the list of 'Inclusions' for this PV, specific emissions intensity number
'steelmaking: for the purpose of calculating a for this production variable based on
facility-specific emissions intensity value information provided in relation to the
when a facility is engaged in the primary ferrous feed (steelmaking) production
steel production activity, emissions from the variable in accordance with section
production of steel from molten iron are 14A of the Safeguard Rule, emissions
included'. from the production of steel from
o under the list of 'Exclusions' for this PV, 'For molten iron are included'.
the purpose of calculating a facility-specific the statement under 'Exclusions'
emissions intensity value when a facility is should be amended in the SGM
engaged in the primary steel production Document to: 'For the purpose of
activity, emissions from the production of calculating a facility-specific
molten iron are excluded'. emissions intensity number for this
production variable based on
information provided in relation to the
Similar to BlueScope’s comments in table 1 in ferrous feed (steelmaking) production
relation to the primary iron PV , while the variable in accordance with section
21
Topic Ref. ‘SGM Ref. ‘SGM Concern Proposal
Rule’ Document’
extract
purpose of these statements is not abundantly 14A of the Safeguard Rule, emissions
clear, BlueScope expects that they are intended from the production of molten iron are
to clarify that for the purpose of an application excluded'.
for an emissions intensity determination to which BlueScope also notes that this statement
proposed section 14A of the SGM Rule applies, under 'Exclusions' should be a separate dot
point as it is unrelated to the preceding
emissions from the production of steel from
exclusion, being 'processes included in (or
molten iron at a facility are relevantly associated
apportioned to) another production
with the ferrous feed (steelmaking) PV, whereas variable’.
emissions from the production of molten iron are
not. That said, BlueScope considers that these
statements, and their purpose, require greater
clarification.
13
Hot-rolled long products Schedule 1 Pg 18–19 BlueScope makes the following observations in BlueScope submits that:
production variable and s45(1), respect of both production variables:
the production variable definition in
hot-rolled flat products s45(2), s46(1)
In subsection (1), the production variable subsection 45(1) should instead refer to
production variable (cold and s46(2)
definitions for hot-rolled long products and hot- the 'hot-rolled long products activity' and
ferrous feed) subsection 43(1) should refer to the 'hot-
rolled flat products refer to the 'hot-rolled
carbon steel long products activity' and 'hot- rolled flat products activity' (ie, removing
rolled carbon steel flat products activity', the references to 'carbon steel').
respectively. As noted above, this is BlueScope submits that equivalent
inconsistent with the defined terms of 'hot- amendments should also be made to the
rolled long products' activity and 'hot-rolled flat SGM Document.
products' activity in sections 36(2) and (3) and subsection 45(2) should be amended as
the general definitions on page 8 of the SGM follows: 'The metric in subsection (1) is
Document and could therefore give rise to applicable to a facility that:
ambiguity as to whether these sections are (a) conducts the hot-rolled long products
intended to refer to the same activity. activity; and
Subsection (2) states that the metric in (b) either:
subsection (1) is applicable to a facility that (i) conducts the manufacture of
conducts: (a) the hot-rolled long (or flat, as carbon steel products from cold
applicable) products activity; and (b) either: (i)
22
Topic Ref. ‘SGM Ref. ‘SGM Concern Proposal
Rule’ Document’
extract
conducts the manufacture of carbon steel ferrous feed activity to produce
products from cold ferrous feed activity; or (ii) is hot-rolled long products; or
a stand-alone hot-rolling mill. This provision (ii) is a stand-alone hot-rolling
could be incorrectly interpreted as suggesting mill.'
that the production variables apply to any
facility that conducts the manufacture of carbon
steel products from cold ferrous feed activity,
rather than applying where the hot-rolled Similarly, BlueScope proposes that
long/flat products are manufactured from subsection 46(2) should be amended as
carbon steel produced by the manufacture of follows: 'The metric in subsection (1) is
carbon steel products from cold ferrous feed applicable to a facility that:
activity. (a) conducts the hot-rolled flat products
In the SGM Document, the 'Inclusions' for both activity; and
production variables encompass 'the (b) either:
component of emissions attributable to the (i) conducts the manufacture of carbon
production of' hot-rolled long products or hot-
steel products from cold ferrous feed
rolled flat products by: the methods used to
activity to produce hot-rolled flat
calculate the emissions of continuously cast
carbon steel in accordance with the products; or
requirements in the National Greenhouse and (ii) is a stand-alone hot-rolling mill.'
Energy Reporting (Measurement) BlueScope submits that equivalent
Determination 2008…'. This could potentially amendments to those described above
include the primary steel manufacturing should also be made to the SGM
method. Document.
In the SGM Document, the 'Exclusions' for both the 'Inclusions' for hot-rolled long products
production variables do not expressly refer to should be amended in the SGM Document
emissions from processes associated with the as follows: 'the component of emissions
hot-rolled long (or flat, as applicable) products attributable to the production of hot-rolled
activity where the products are manufactured long products, where the products are
from carbon steel produced by the primary manufactured from carbon steel produced
steel manufacturing activity. BlueScope as part of carrying on the manufacture of
considers that expressly excluding such carbon steel products from cold ferrous
emissions would provide additional clarity. feed activity at the facility, by…'. Similarly,
the 'Inclusions' for hot-rolled flat products
should be amended as follows: 'the
23
Topic Ref. ‘SGM Ref. ‘SGM Concern Proposal
Rule’ Document’
extract
component of emissions attributable to the
production of hot-rolled flat products, where
the products are manufactured from carbon
steel produced as part of carrying on the
manufacture of carbon steel products from
cold ferrous feed activity at the facility,
by…'.
for clarity, an additional exclusion should be
added to the 'Exclusions' in the SGM
Document for both production variables.
For hot-rolled long products, the exclusion
should read: 'production of hot-rolled long
products where the products are
manufactured from carbon steel produced
as part of carrying on the primary
steelmaking manufacturing activity at the
facility'.
For hot-rolled flat products, the exclusion
should read: 'production of hot-rolled flat
products where the products are
manufactured from carbon steel produced
as part of carrying on the primary
steelmaking manufacturing activity at the
facility'.
24
Appendix – detailed drafting suggestions
1. Proposed amendments to subsections 14A(1) and 19A(1)
Proposed amendments to subsection 14A(1)
BlueScope submits that subsection 14A(1) should be amended as follows:
(1) This section applies if an application for an emissions intensity determination under section 14 specifies primary steel as a production variable for the
facility and the application requests the Regulator to also determine a facility-specific emissions intensity number for the primary iron production
variable and the continuously cast carbon steel products and ingots of carbon steel (manufacture of carbon steel products from cold ferrous feed)
production variable.
Proposed amendments to subsection 19A(1)
BlueScope submits that subsection 19A(1) should be amended as follows:
(1) This section applies if an emissions intensity determination under section 19 specifies the facility-specific emissions intensity number of primary steel
and the relevant application for an emissions intensity determination requested the Regulator to also determine a facility-specific emissions intensity
number for the primary iron production variable and the continuously cast carbon steel products and ingots of carbon steel (manufacture of carbon
steel products from cold ferrous feed) production variable.
2. Proposed amendments to the remainder of section 14A
Option 1
BlueScope considers that it would be clearest, and therefore preferable, to set out the amended form of sections 39 and 44 of Schedule 1 (that result from the
application of the modifications described in sections 14A(4) and 14A(5) in the Exposure Draft) in full within section 14A. Accordingly, BlueScope proposes that
25
subsections 14A(3), (4) and (5) should be replaced with the following:
…
(3) In this Part:
(a) primary iron (steelmaking) production variable has the meaning given to it in subsection (4); and
(b) ferrous feed (steelmaking) production variable has the meaning given to it in subsection (5).
(4) The primary iron (steelmaking) production variable is a production variable with the following meaning and metrics, and the measurement
requirements and default emissions intensity and best practice emissions intensity set out in subsections 39(4), (5) and (6) of Schedule 1:
39 Primary iron (steelmaking)
(1) Tonnes of metallic iron products, calculated in accordance with subsection (4), that:
(a) are produced as part of carrying on the primary steel manufacturing activity at the facility; and
(b) are of saleable quality.
(2) The metric in subsection (1) is applicable to a facility that conducts the activity of the physical and chemical processing of iron
containing feeds into a crude iron product suitable for use by the facility for manufacturing primary steel.
Examples: Pig iron, hot briquetted iron, direct reduced iron and cast iron are each a crude iron product that may be suitable for export
from a facility.
(3) The activity in subsection (2) is the primary iron (steelmaking) production activity.
(5) The ferrous feed (steelmaking) production variable is a production variable with the following meaning and metrics, and the circumstances of
application and default emissions intensity set out in subsections 44(2) and 44(3) of Schedule 1:
26
44 Ferrous feed (steelmaking)
(1) Tonnes of continuously cast carbon steel products and ingots of carbon steel that:
(a) are produced as part of carrying on the primary steel manufacturing activity at the facility; and
(b) are of saleable quality.
Note: Emissions associated with the primary iron (steelmaking) production variable and ferrous feed (steelmaking) production variable would also
be relevantly associated with the primary steel production variable.
BlueScope notes that emissions are relevantly associated with PVs, rather than the 'production' of certain products which may result from various processes
(per section 16(1) of the Safeguard Rules) and submits that the 'Note' to subsection 14A(5) should be amended accordingly. The purpose of this note is also
unclear and should be clarified. BlueScope assumes the purpose is to clarify that emissions associated with the 'placeholder' primary iron (steelmaking) PV
and ferrous feed (steelmaking) PV should still also be taken into account in determining the facility-specific emissions intensity number for the primary steel PV.
Option 2
In the alternative, if DCCEEW is not open to setting out the modified form of sections 39 and 44 of Schedule 1 in full within sections 14A(4) and 14(5), BlueScope considers that there is nevertheless a need to amend proposed section 14A to clarify its operation, and that subsections (3), (4) and (5) should be amended as follows:
(3) In this Part:
(a) the primary iron (steelmaking) production variable is the production variable that results from the operation of has the meaning given to it in
subsection (4); and
(b) the ferrous feed (steelmaking) production variable is the production variable that results from the operation of has the meaning given to it in
subsection (5).
27
(4) For the definition of The primary iron (steelmaking) production variable, assume section 39 of Schedule 1 also applies as if the following
modifications were made to that section is a production variable with the same metrics, circumstances of application, measurement requirements,
default emissions intensity and best practice emissions intensity as the production variable set out in section 39 of Schedule 1, subject to the following
modifications:
(a) after the heading, add “(steelmaking)”;
(b) in paragraph (1)(a), omit “primary iron production activity”, substitute “primary steel manufacturing activity”;
(c) omit paragraph (1)(b);
(d) in subsection (2), omit “export from the facility”, substitute “use by the facility for manufacturing primary steel”;
(e) in subsection (3), omit “primary iron production activity”, substitute “primary iron (steelmaking) production activity”.
(5) For the definition of The ferrous feed (steelmaking) production variable, assume section 44 of Schedule 1 also applies as if the following
modifications were made to that section: is a production variable with the same metrics, circumstances of application and default emissions intensity
as the production variable set out in section 44 of Schedule 1, subject to the following modifications:
(a) omit the heading, substitute “Ferrous feed (steelmaking)”;
(b) omit paragraph (1)(a);
(c) in paragraph (1)(b), omit “not”.
Note: Emissions associated with the production of primary iron (steelmaking) production variable and continuously cast carbon steel products and
ingots of carbon steel ferrous feed (steelmaking) production variable would also be relevantly associated with the primary steel production variable.
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