DECARBONISATION OF THE STEEL INDUSTRY – PATHWAY TO BRIGHTER FUTURE – SLOVAKIA AND CZECH REPUBLIC CASE STUDY

The aim of this study is to analyze the potential of decarbonization of steel production in Slovakia and Czech Republic. The study examines the European CO 2 emissions policy, steel production trends, and the European emission trading system (EU ETS) allowances and emissions of Slovakia and Czech Republic steel producers. The production of iron, steel and non-ferrous metals has a significant presence in Slovakia and Czech Republic. The metal industry, mainly iron and steel, is one of the largest energy-consuming industry, followed by non-metallic minerals. Steel making ranks as one of the three highest CO 2 emitting industries, and since production occurs in a limited number of locations – the U.S. Steel Košice, s. r. o. steel-mill being the largest single producer of emissions in Slovakia and Třinecké Železárny, a. s. with Liberty Ostrava, a. s. being ones of the largest in Czech Republic – they are prime candidates for decarbonization. This paper deals with the analysis of the metallurgical sector of steel production in Slovakia and the Czech Republic using the European Union Emission Trading Scheme (EU ETS).


INTRODUCTION
On the one hand, an ambitious European Climate Action Program to 2020 must be seen as a huge success, and on the other, real work is just beginning five years after the Paris Agreement, all 27 Member States of the European Union (EU) have agreed on an ambitious medium-term plan to reduce emissions by at least 55 % by 2030 compared to 1990, a proposal adopted by the European Council in December 2020 [1,2,3]. The European Union Emission Trading Scheme (EU ETS) is the primary tool for Slovakia and the Czech Republic in setting carbon prices and is also a central policy tool for reducing greenhouse gas emissions [4]. The EU ETS is a cornerstone of the European Union's policy to combat climate change and is a key tool for reducing greenhouse gas emissions cost-effectively, covering around 40 % of all greenhouse gas emissions in the European Union. The EU ETS operates on a "cap and trade" basis. A ceiling is set for the total amount of certain greenhouse gases that may be emitted by installations covered by this scheme. The limit decreases over time, so total emissions decrease [4].
The largest emitters of greenhouse gases in the European Union are the energy industry, fuel combustion and transport. Industrial processes produce only 8.7 % of emissions within the Union as shown in Figure 1. The production of key materials and chemicalssteel, plastics, ammonia, and cementemits approximately 500 million tons of CO2 per year, 14 % of the EU total. The greenhouse gas of most relevance to the world steel industry is carbon dioxide (CO2). On average, 1.9 tons of CO2 are emitted for every ton of steel produced. According to the International Energy Agency, the iron and steel industry accounts for approximately 4-5 % of total world CO2 emissions. The European steel industry produces 169 million tons of steel per year as shown in Figure 2 which stands for only 8,4% of 2019 worldwide steel production [5,6,7,8].
The current trend in metallurgy is to achieve the production of high-quality and competitive steel on the world market with the lowest possible amount of CO2 emissions per ton of steel produced. The increasing demand for quality steel on the world market is putting pressure on innovation and optimization of current technologies and the implementation of new processes in the metallurgical industry in order to achieve carbon neutrality. The production of CO2 emissions in selected integrated steel plants was based on the European ETS trading system from 2010 including the prediction for 2030 as shown in Table 1. Predicted data for individual companies until 2030 were based on public statements of each individual steel producer with the assumption for continuous reduction of emissions until year 2030 without a significant change in the process and technologies used over the next 10 years. New measures and innovations of existing equipment will be introduced for each individual producers with the aim of reducing the amount of CO2 emissions without the need to change their overall technological process. Due to the high initial investment costs and the timeconsuming implementation of innovations in Integrated steel production, the transition to zero-emission steel in selected companies is expected beyond 2030. Potential interventions in the production cycle in the form of production limitation are not included in the prediction data. The forecast is informative and creates a picture of the potential emissions costs of individual companies in the optimistic scenario of the development of the price of emission allowances as shown in Figure 3. Companies can get part of their quotas free of charge, the rest they must buy at auction or at the market. Each quota represents the right to emit one ton of carbon dioxide (CO2). The total costs associated with the purchase of emission allowances are based on the principle of the difference between Free Allocation and Verified emissions, the difference being the company's loss or profit.
The European Commission is due to propose its Carbon Border Adjustment Mechanism (CBAM) on July 14, 2021, a move designed to put EU firms on an equal footing with competitors in countries with weaker carbon policies [11]. The European Parliament has already expressed its views on CBAM, saying free allowances must continue. In fact, a phase-in and phase-out period can be envisaged where both systems co-exist [12,13]. For this reason, two predictions of free allowances are given, with a year-on-year decrease of 2.5 % and 10 % by 2030. A 2.5 % reduction represents an ambitious plan to reduce emissions by 55 % by 2030 and a 10 % reduction represents a potential transition period for CBAM. The analysis of the price of emission allowances of individual steel companies is shown in Figures 4,5,6.  To meet global energy and climate goals, emissions from the steel industry must fall by at least 50% by 2050 compared to the present situation, with continuing declines towards zero emissions being pursued thereafter. Deep emission reductions are not achievable without innovation in technologies for near-zero emissions steelmaking shown in Figure 7. A sustainable transition for the iron and steel sector will not come about on its own; governments will play a central role [14]. Major and rapid change will be necessary in all casesand there are clear needs for policies to enable the transition. Far more resources must be devoted to accelerating innovation on several fronts. Credible new policy solutions are needed to make it viable to pursue low-CO2 production routes that are up to 20% more expensive than current routes [8]. To remain competitive steel companies in Slovakia and the Czech Republic need a strategy until 2050 as soon as possible to achieve near-zero emission production of steel.

CONCLUSION
Europe's ambitious plan to achieve carbon neutrality by 2050 is a major challenge for the metallurgical industry. Individual metallurgical companies must make great efforts to achieve the highest possible reduction in CO2 emissions despite potential technological, organizational, regulatory, and financial barriers. The rising price of

Tons of CO2 per ton of steel
Production routes emission allowances in the coming years and the potential reduction of free allowances with the arrival of CBAM can cause for steel producers an increase in the production price by more than 100€ per ton of steel produced by 2030, which may lead to reduced competitiveness of Slovak and Czech steelworks. However, through innovation, low-carbon technology deployment and resource efficiency, iron and steel producers have a major opportunity to reduce energy consumption and greenhouse gas emissions, develop more sustainable products and enhance their competitiveness. However, financial assistance from the government and the European Union will be needed in this regard.