WHEN TRUST MATTERS
Introduction
Steel is a ubiquitous material. It appears to
be an essential input material for all
economic sectors. However, steel is one of
the most carbon intensive materials
whereby each tonne of steel embodies
about 1.9 tonnes of CO2. Consequently,
steel contributes significantly to the carbon
footprint of the global economy. This puts
the steel industry under additional scrutiny,
not only by the companies purchasing and
using steel, who desire green or low carbon
steel materials, but also by investors
seeking to pursue sustainable investments,
and by NGOs and other stakeholders
holding the industry responsible for its
environmental impacts. Green steelmaking
through the use of technologies such as
hydrogen-based, Direct Reduced Iron (DRI)
and Electric Arc Furnace (EAF), is
anticipated to displace traditional
steelmaking using Blast Furnace (BF) and
Basic Oxygen Steelmaking (BOS). These
new technologies also allow steel scrap
recycling on a massive scale, but green
steelmaking is still not mature and will
scale-up in the long-run, presumably at
higher initial investment costs. However, as
a response to the current market demands
for materials with reduced impacts, and in
the pursuit of short- and medium-term
decarbonization pathways towards net zero
commitments by 2050, steelmakers are
urgently seeking Green Steel Assurance.
This approach entails virtual reduction of
Figure 1. The process that steel producers follow to pursue green steel assurance
DNV SCPA. All rights reserved. Last updated: 01.11.2022
emission intensity of the steel products by
allocating a volume of emission savings
achieved by improving conventional
steelmaking practices or by increasing the
recycled content of steel scrap. GHG
emission saving projects can be from a
wide range of CAPEX and OPEX initiatives
that improve the business-as-usual GHG
performance, provided that validation
criteria are satisfied and can be
independently verified. The emission
savings are then transparently documented
and traded together with steel products by
means of verified certificates. These
certificates, therefore, give customers
confidence to procure steel with a carbon
emissions intensity that has been lowered
or neutralized from a certain threshold.
However, implementing green steel
assurance involves a multiphase approach
and the complexity of that process may
differ depending on the maturity of the
company undertaking it.
Figure 1 describes the six steps involved in
the setup and implementation of a green
steel assurance process. The assurance part
of the approach rests on a mandatory third-
party verification process to substantiate
that the GHG assertion claimed from GHG
saving projects implemented in a
steelmaking plant have been properly
calculated and truthfully reported, and in
accordance with relevant GHG program
rules and standards.
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 WHEN TRUST MATTERS

The fundamentals of green steel assurance

The concept of green or low-carbon emissions steel is based on
the compensation mechanism for the hard-to-abate sectors.
The mechanism lays down procedures on how companies can
compensate residual emissions beyond their value chains to
achieve carbon neutrality. The exception and perhaps the
unique differentiation for the steel industry is that the emissions
savings and associated certificates are solely traded within the
steel value chain.

The emissions savings are calculated over a defined timespan

against business-as-usual scenarios by the project proponent.
Figure 2. GHG projects reduce
emissions from production, Figure 2 illustrates how GHG savings are derived. The
yielding savings for allocation Greenhouse Gas Protocol for Project Accounting and Reporting
to Green Steel products. Standard as issued by WRI/WBCSD serves as the standard for
emission savings quantification. In some cases, the standard is supplemented by other relevant
standards such as ISO 14067, EN 19694, ISO 14404, ISO 14064, and ISO 20915.

It is noteworthy that the same assurance concept can be applied to many other hard-to-abate
industry and material sectors such as aluminum, limestone mining and processing, asphalt,
cement, and fertilizers to harness similar decarbonization advantages.

The rationales for green steel assurance

The adoption of and demand for green or low-emissions steel in the steel industry and its
value chain are supported by several compelling advantages:

• Generating incentives for steelmaking companies to continue to reduce their direct

and indirect carbon emissions. This approach catalyzes steel decarbonization efforts by
steelmakers and makes the process more transparent to their customers and other market
actors. It establishes a robust framework through which steel value chain actors can abate
the financial barriers of decarbonization. When customers purchase green or low emissions
steel on special premiums, the proceeds are used to carry out additional decarbonization
initiatives. These may include CAPEX retrofits, process optimizing projects, and plausibly
switching to the energy supplies with incrementally lower emissions impacts, such as
natural gas, HBI, COG, biomethane, biomass and use of Renewable Electricity Certificates.
• Promoting an inclusive decarbonization of the steel industry from the upstream
supply chain. Steel embodied carbon intensity does not only result from energy intensive
processes of the blast furnaces and basic oxygen steelmaking but also depends on
enormous fossil-based feedstocks such as coal and limestone. The creation of sellable
carbon credits (e.g., green lime that can be traded to steelmaking plants in the form of
Guarantees of Origin) is an enabler for fast-tracking steel sector decarbonization from the
upstream supply chain.
• Satisfying the growing demand for green or low-carbon steel in the short- to mid-
term. The issuance of green or low-emissions steel certificates is rising hand in hand with
customers’ desire to procure steel with less environmental impacts in quest of achieving

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 WHEN TRUST MATTERS

their short- and long-term climate goals. With green steel certificates, customers can
declare the equivalent emission reduction in their scope 3 emissions in compliance with
the GHG Protocol for Project Accounting Standards.
• Keeping the net-zero ambition alive while preventing early retirement and stranded
assets. Companies in the steelmaking value chain may face the choice of turning existing
energy- and carbon-intensive investments into stranded assets to meet their long-term
carbon neutrality commitments. Therefore, adopting green or low-carbon emissions steel
schemes would promote drastic emission reductions in the steel industry through
retrofitting of the existing infrastructure with cutting-edge technologies, in parallel with
gradual phase-out of fossil-based technologies to increase the share of renewables and
hydrogen.
• Positioning and differentiating companies’ steel products to the market based on
their environmental impacts. Customers’ appetite for green and low carbon emissions
steel is distinctively dictating the steel market competition.

Green Steel in the market now

First movers
Recently, three big steel companies in the European Union have commissioned third-party
verification bodies with extensive experience in the steel industry to pioneer and unfold – with
demonstrable benchmarks and good practices to more than 1000 peers worldwide – the
sector’s decarbonization opportunities associated with green and low carbon steel initiatives:

ArcelorMittal established the
XCarb®, a brand that
encompasses all company
initiatives for reduced, low- and
zero-carbon products and
steelmaking activities. By far, the
company has released the XCarb®
Green steel certificate (assured by
DNV) specifically designed to
improve GHG emission
performance and respectively, to
allocate those emission savings to
flat steel products made from iron
ore in a blast furnace. In addition, it
launched the XCarb® recycled and
renewably produced steel
certificates (assured DNV) under
which an extremely low-carbon
steel of about 300kgCO2 per tonne
is achieved by employing Electric
Arc Furnace route using scrap
steel and 100% renewable energy.
The bluemint®Steel is a low-carbon
steel products initiative launched by
Thyssenkrupp to give customers the
certainty to use high-quality steel with
an improved Eco balance. It is
comprised of two types of low-carbon
product certificates resulting from
CO2-emission reductions achieved at
the Duisburg production site in
Germany. The bluemint® Pure steel
certificates (assured by DNV) achieved
a 0.6 tCO2eq/t of hot-rolled coil
representing 70% of emission
intensity reduction compared to
conventional steel by the use of hot
briquetted iron (‘HBI’) in a blast
furnace in replacement of coal and
coke. Whereas, the bluemint®
recycled steel certificates (assured by
TÜV SÜD) allow customers to
purchase steel with 64% less specific
CO2 emission achieved by balancing
an independent scrap recycling route
in the blast furnace process.
In July 2022, Tata Steel Europe
launched a similar initiative under the
brand name of Zeremis™ Carbon
Lite (assured by DNV). Tata Steel
achieves emission savings from
implementing a wide range of GHG
projects including process
improvement, capex investment,
decarbonizing onsite logistics and by
adopting low carbon alternative
technologies. These savings are
cumulatively stored in a centrally
managed carbon bank. While
Zeremis stands for Zero emissions,
customers can purchase any Tata
Steel products with up to 100%
carbon emission reduction (green
steel) enabling them to directly
achieve their carbon reduction
targets.

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 WHEN TRUST MATTERS

Green steel certificates and chain of custody models

Book and Claim Model (Intra-company assurance)

Figure 3. Intra-company certificates chain of custody

Pioneers of the green steel schemes currently adopt the ‘book and claim’ or mass balance
approach to trade premiums of emission savings within the value chain, as illustrated in Figure
3.

In this model, the project proponent – otherwise the company undertaking green steel
assurance – develops scheme rules that define the type of allowable projects (e.g., displacing
fossil-based electricity with renewable electricity), establishes emission savings calculation
methodologies, and outlines procedures to register achieved emission savings (i.e., carbon
bank). At this stage, the project proponent may admit a third-party body to test the developed
methodology and rules against relevant standards. Once GHG projects are implemented, the
achieved savings are quantified and cumulatively consolidated in a central carbon bank upon
a third-party verification and assurance to ensure credibility of the claims. Going further
downstream and depending on the customers’ intentions and requirements, steel products
are then traded with certificates displaying a traceable unique number and the allocated
virtual emissions reduction withdrawn from the central bank. Finally, as a means of minimizing
the risk of double selling of certificates, this model incorporates an assurance over the sales of
certificates representing the volume of emission savings withdrawn from the bank.

Trust is at stake

Trust sits at the center of the entire process of green steel assurance. Purchasers of green steel
certificates are keen on ensuring that the emission savings premiums traded to them are
credible, trustworthy, and genuinely originating from GHG saving projects. Investors are also
becoming more aware of climate change impacts and are increasingly willing to invest their
values in demonstrably sustainable businesses. In addition, NGOs, the public, governments,
and other stakeholders seek to know and understand steps or actions being taken by steel
value chain actors to tackle the net-zero challenge by 2050. However, although substantial
steps were taken to instigate the concept of green and low carbon emissions steel, the current
model is run manually. Carbon banks are created and managed using excel-based tools and
require manual inputs of carbon savings and outputs of sold credits. Transparency throughout
the chain of custody is only safeguarded by a series of third-party assurances on each carbon
saving project and periodic assurances over certificates reconciliation and carbon bank
operations. By following the current process, it cannot be ruled out that human errors may
occur leading to double-selling of certificates downstream or double accounting of emission
savings. Additionally, the current model employs a limited assurance that relies on limited

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 WHEN TRUST MATTERS

sources of information to substantiate the claims. Therefore, there is clearly a need for a robust
and decentralized assurance system that ensures trust throughout the green steel assurance
processes.

Strengthening trust over the book and claim model with non-fungible
tokens

With non-fungible tokens (NFTs) implemented on a blockchain, immutable, decentralized, and

trustworthy downstream distributions of green steel certificates can be achieved and can
enhance the assurance process. By means of NFTs, emission savings certificates can be issued,
subdivided, and stored on a digital marketplace, and eventually traded as tokens with
attributed emission reductions to customers.

Figure 4: Illustration of NFT enabled green steel assurance

Certificates can be transferred to customers with a unique ID via digital transactions that
cannot be repeated, hence abating risks of double use or selling of certificates. Figure 4 gives
a glimpse of how an NFT enabled green steel certificates issuance works.

Identity-preserved chain of custody mode (intercompany assurance)

The identity-preserved approach is more
encompassing, and it may provide customers
with a clearer picture of the steel product’s
carbon content and all decarbonization efforts
undertaken throughout the value chain. This
model requires assurance over all operations in
the value chain.

The model entails a sophisticated collection of

operational data up to the most granular level of
each process involved in the making of the Figure 5. Framework for the identity-
product including mining, steel production, preserved chain of custody model
manufacturing, and distribution to customers.

The steel product is tracked and traced throughout the chain of custody. Emission savings
achieved at every level in the value chain can be attributed to the product and displayed on
the final certificate that is digitally presented to customers.

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 WHEN TRUST MATTERS

This model requires significant investments from all value chain actors and needs
intercompany assurance to establish trust.

To sum up, this paper highlighted important steps of green steel assurance, providing insights
into the contemporary practices and market challenges where trust across the entire value
chain is key. It also demonstrated how the use of digital technology such as blockchain and
NFTs can enhance transparency and trust amongst stakeholders.

About DNV:
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