A key factor that will influence value within the industry over the longer term is the continuation and extension of environmental regulation, in particular, the focus on carbon emissions from energy intensive industries. Carbon has had a price in Europe since 2005 and stricter emission caps will apply to the metals sector in the years to come.
For energy-intensive industries covered by the European Union’s Emissions Trading System (EU ETS), the economic slowdown has meant that many have accrued surplus carbon allowances. In steelmaking for example, WorldSteel estimates that EU steel production fell by more than 43% for the six months from January to June 2009, compared to the same period last year. This equates to a saving of around 85 million tonnes of carbon dioxide (CO2-e).
2009 has witnessed significant progress in the global approach to climate change. The Obama administration has introduced a new era in climate change policy in the US and, as a result, a global deal in Copenhagen this December to extend the Kyoto Protocol appears more tangible.
China has also announced new ambitious renewable energy and energy efficiency targets and hosts some of the world’s largest renewable energy companies. Brazil also announced a new National Plan on Climate Change and national governments in industrialized countries including Japan and Australia are introducing new legislation to reduce emissions.
It is these regulatory developments, combined with changing consumer requirements (e.g. high-strength and lightweight products) that will affect the distribution of value within the metals sector. This has implications for corporate strategy, operations and M&A.
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