Last week, the U.S. International Trade Commission (ITC) released a report assessing the greenhouse gas (GHG) emissions intensities of steel and aluminum products made in the U.S. in 2022. This is the most comprehensive attempt by the U.S. government to determine product-level emissions intensity estimates.
The ITC report is timely as the EU is expected to publish default rates this year for the Carbon Border Adjustment Mechanism (CBAM). And now the U.S. has the data that it needs to support the best interests of U.S. steel and aluminum producers as those defaults are set.
The CBAM defaults will be informed by EU analysis of product-level emissions intensity in the U.S. and other EU trade partners. A 2023 study by the EU’s Joint Research Centre (JRC) is the most recent piece of analysis from the EU.
Comparison of the ITC and JRC analyses show that the EU estimate of U.S. iron & steel emissions intensity is consistently greater than the U.S. estimate.
The ITC investigation provides two different estimates for U.S. product-level emissions intensities: 1) average emissions intensity across industry and 2) high-end estimates that represent production from the top 10% most emissions-intensive facilities.
- EU JRC comparison to U.S. ITC average estimate: For 86% of steel products studied by ITC, the JRC estimate is greater than the average ITC emissions intensity estimate. Across products, the JRC estimate is greater than this ITC estimate by 55% on average.
- EU JRC comparison to U.S. ITC high-end estimate: For 1/3 of steel products studied by ITC, the JRC estimate is still greater than the high-end ITC emissions intensity estimate.
It’s important to note that the ITC analysis uses a much more complete approach to emissions intensity analysis. The ITC studies three greenhouse gases (methane, nitrous oxide, and carbon dioxide) and sources of fugitive emissions up the supply chain. JRC’s analysis accounts for only carbon dioxide emissions. Even when capturing more sources of emissions, the ITC’s estimates for U.S. average emissions intensity is lower than JRC’s estimates.
Also, the JRC calculates national average emissions intensity based only on “the production pathway with the highest GHG emission intensity” within any given country. In other words, the EU analysis overlooks the carbon advantage that American manufacturers have produced through prolonged investment in more efficient manufacturing methods, lower-carbon fuel sources, and production efficiencies.
These methodological decisions are consequential. If JRC’s estimates inform the EU CBAM default values as we expect, U.S. iron & steel companies are likely to be charged more than they should be.
We know that the U.S. produces key industrial commodities like iron & steel with fewer emissions than foreign competitors. Government data resources that show the U.S. carbon advantage are important as more international partners turn to price the emissions associated with imports.
Similar studies to the ITC report like the Department of Energy pilot and the study directed by the PROVE IT Act can provide a reliable point of comparison for U.S. emissions intensity across a wider range of products. Without these resources, efficient U.S. firms will be at a disadvantage, an outcome that is worse for American manufacturers and the global climate.