Agreement on quotas of carbon dioxide emissions for ArcelorMittal

In May 2007, the steel group ArcelorMittal announced its intention to reconsider the decision to close the blast furnace in the Liège region of southeast Belgium. After examining the technical and economical possibilities, the management promised to maintain the hot phase in the region on the basis of an agreement concerning its quotas of carbon dioxide emissions respecting the Kyoto Protocol. This decision protects the economic and social life of the region for another four years.

In 2005, the steel group Arcelor, which has since merged with the Indian group Mittal to form ArcelorMittal, settled a closing plan for the company’s two blast furnaces situated in the region of Liège in southeast Belgium. The ‘hot phase’, which was the heart of the economic and social life of the region, was doomed to closure due to its inability to maintain its competitiveness in a new globalised steel market (BE0505301N).

However, in 2007, new hopes for the region came to light when the economic context improved for the steel industry. Thus, the Chief Executive Officer of ArcelorMittal, Laskhmi Mittal, announced the company’s intention to reconsider the decision to close the blast furnaces in the Liège region (BE0706029I).

As a result of pressure from the local trade unions – including the Belgian General Confederation of Labour (Fédération Générale du Travail de Belgique/Algemeen Belgisch Vakverbond, FGTB/ABVV) – and the regional authorities, Mr Mittal agreed to restart a furnace closed since 2005 at a site in Seraing in the Liège province. The site appeared to be adequate for new steel production, thereby relaunching the ‘hot phase’ activities in the region. However, the Indian steel group agreed to the reopening of the blast furnace on the condition that it would have the right to emit additional carbon dioxide (CO2) quotas at favourable prices. This system of purchasing CO2 emission quotas has been established in order to respect the limits agreed on in the Kyoto protocol – an amendment to the international treaty on climate change, which assigns mandatory targets for the reduction of greenhouse gas emissions to signatory nations.

Agreeing additional CO2 emissions quota

Under the Kyoto protocol, each signatory country, including Belgium, accepted to limit their greenhouse gas emissions by 7.5% compared with their emissions during the 1990s. The European Commission requested each Member State to define an allocation plan forecasting quotas of gas emission for each company. In light of this, the re-opening of the ‘hot phase’ in Seraing was then highly dependent on the quotas of gas emissions that would be reserved for ArcelorMittal in the Belgian national allocation plan.

The federal authorities and the regional authorities of Wallonia and Flanders finally reached an agreement allocating the 20 million tons of CO2 quotas, which ArcelorMittal estimated that it would need to operate the company’s two blast furnaces for a five-year period (2008–2012). ArcelorMittal accepted this plan: of the four million tons produced annually, the company agreed to pay for 1.4 million tons, while the Walloon region will cover the cost of the remainder.

First casting delayed

A few hours only after the plan was agreed by all of the parties involved, the employees of the ArcelorMittal group were already at work in order to operate the blast furnace.

Forty workers are currently employed to carry out this task, but soon this number will double and young workers will be integrated into the teams. As a result of the agreement, employment in the region will increase by 10,000 jobs, which includes the jobs maintained on the second blast furnace, the 180 newly employed workers who will reinforce the existing labour force but also the workers from the 70 subcontractors operating at the furnaces.

Nonetheless, the future of the ‘hot phase’ remained uncertain for several months. The first operations to restart the blast furnace began in September 2007 with the aim of operating the infrastructure to its full capacity by the end of January 2008.

Although ArcelorMittal insisted on the gas emissions quotas which were agreed as an essential condition for the restart of operations at the furnaces, no agreement had been reached among the Belgian authorities at that time. On 21 January 2008, the original planned day for the restart of production, the workers and the trade unions went on strike and many demonstrations were organised to put pressure on the public actors involved. Finally, an agreement was reached to suit the demands of the steel group which launched the last phase of operations with a first casting forecast for the beginning of March 2008.

Future of European steel industry

While the trade unions and the metalworkers were delighted at the news, others remained more sceptical about the restart of operations at the Seraing plant. This was the case among a group of residents living near the production site who were worried about the pollution caused by the operation of the furnace. Today, ecological issues have become highly important and the demands of the citizens regarding their living conditions are different from those of 20 years ago.

Moreover, the furnace will not only have a local impact but it also reveals a necessary transformation of the European steel industry. The additional charges associated with greenhouse gas emissions are posing a challenge for steel companies operating in Europe and in the signatory countries of the Kyoto protocol. These charges will be disadvantageous to European companies in comparison with industries operating outside the Kyoto zone.

However, ‘greener’ production processes are of importance to ArcelorMittal and cannot be neglected. For now, new production processes are being considered and the idea of a more environmentally-friendly steel production label was proposed.

Commentary

This latter kind of solution must be considered by the principal stakeholders in ArcelorMittal. The issue will be soon at stake when the current agreement comes to an end in 2012, with major consequences for local employment in the Liège province.

Emmanuelle Perin, Institute for Labour Studies, Catholic University of Louvain