Greenhouse Gas Emissions Intensities of the Steel and Aluminum Industries at the Product Level

We began our work on border adjustments nearly a decade ago, because we did not expect that the approach taken in the American Clean Energy and Security Act to provide protection for domestic producers against imports from countries without greenhouse gas (GHG) control policies would be acceptable to the World Trade Organization (WTO). In 2018, together with Georgetown University Law School professors Jennifer A. Hillman and Mathew C. Porterfield, we developed a WTO-compatible Framework Flannery, Brian P., Jennifer A. Hillman, Jan W. Mares, and Matthew C. Porterfield, 2020. Framework Proposal for a US Upstream GHG Tax with WTO-Compliant Border Adjustments: 2020 Update. Washington, DC: Resources for the Future. for border adjustments in the context of a US domestic carbon tax. As a central concept of the Framework, we proposed a Greenhouse Gas Index (GGI) to account for the carbon dioxide equivalent emissions (CO2e) required to manufacture covered GHG-intensive products. For a given manufacturing facility or operation, e.g., to produce steel or petrochemicals, GGI accounts for GHG emissions occurring both from production operations, as well as the emissions required to produce GHG-intensive products purchased from suppliers of electricity, fuels used to generate thermal energy and raw materials. For many years, US facilities that emit more than 25,000 tonnes CO2e annually have determined and reported their GHG emissions to EPA. Key innovations in the Framework include the treatment of emissions from products acquired through the manufacturer’s supply chain (in a fashion similar to value-added taxes) and the design of straightforward procedures to allocate emissions from a facility to the GHG-intensive products it manufactures. Our approach, GGI, is consistent with standards developed by the International Organization for Standardization (ISO). In a consistent, comprehensive fashion, GGI applies to GHG-intensive products in all sectors of the economy, including those that produce aluminum, iron, and steel. The appendix to this report contains a list with links to our blogs and reports on border adjustments and the GHG intensity of products.

Over the past several years, we have interacted with experts from academia, national governments, international organizations, and importantly, with over a dozen sectoral trade associations. Based on these interactions, discussions, and our own relevant experience, we believe that our approach is feasible for industry and relevant to various applications that involve GHG-intensive products, including, for example, border adjustments, procurement policies, and corporate reporting. In particular, GGI could apply to products of US and foreign manufacturers in the aluminum, iron, and steel sectors.

This report updates, expands upon, and should be considered as a replacement for the testimony and submissions we provided the US International Trade Commission related to its hearing on December 7, 2023. It additionally serves as a modification and expansion of the modules for Iron, Steel, and Ferroalloys and for Alumina and Primary and Secondary Unwrought Aluminum in our 2022 report: The Greenhouse Gas Index for Products in 39 Industrial Sectors.

We are currently developing and will publish the estimated range of GGIs for many products in the modules for 39 industrial sectors in our 2022 report because of the US ITC hearing and anticipating further government interest in this subject.

The tables below provide estimated, illustrative low and high GGI values for representative basic products in the aluminum and steel sectors. Results are illustrative because manufacturers in the United States and around the globe utilize an enormous variety of processes, sources of energy, and raw materials in facilities with differing efficiencies to create similar products.