1. 0 Allocation in phase 3 of EU ETS Case study: integrated steel mill

2. 1 Provide all information that is requested by the data collection template Data collection template: tab D_Emissions  Determine if the installation is eligible for free allocation? Yes  Determine if the installation is an electricity generator pursuant Art. 3(u)? No  Choose baseline period baseline period? 2005-2008  Check if the installation operated at least one day in each calendar year in the baseline period? Yes  Report greenhouse Gas Emissions and Energy input from fuels

3. 2 Simplified integrated iron and steel plant Waste gas Coke product Iron/steel Heat Sinter product Fuel Coke Oven Blast Furnace Flare Fuel input Sintering Steel rolling Basic Oxygen Furnace Continuous casting Hot stoves Steam production Hot Metal Power plant Heat production ETS Permit 60 PJ 4.2 PJ 7.1 Mt 6.3 Mt 2.6 Mt 8.7 PJ 9.9 PJ 33 PJ Numbers used in this example are fictitious!!!

4. 3 Waste gas Coke product Iron/steel Heat Sinter product Fuel Coke Oven Blast Furnace Flare Fuel input Sintering Steel rolling Basic Oxygen Furnace Continuous casting Hot stoves Steam production Hot Metal Power plant Heat production Case Study - Simplified integrated iron and steel plant ETS Permit

5. 4 Waste gas Coke product Iron/steel Heat Sinter product Fuel Coke Oven Blast Furnace Flare Fuel input Sintering Steel rolling Basic Oxygen Furnace Continuous casting Hot stoves Steam production Hot Metal Power plant Heat production Report relevant technical connections ETS Permit

6. 5 Waste gas Coke product Iron/steel Heat Sinter product Fuel Coke Oven Blast Furnace Flare Fuel input Sintering Steel rolling Basic Oxygen Furnace Continuous casting Hot stoves Steam production Hot Metal Power plant Heat production Report relevant technical connections ETS Permit Data collection template: tab A_InstallationData

7. 6 Power plant Heat production Waste gas Coke product Iron/steel Heat Sinter product Fuel Coke Oven Blast Furnace Flare Steel rolling Basic Oxygen Furnace Continuous casting Hot stoves Steam production Hot Metal Define sub-installations A sinter product benchmark sub-installation Sintering ETS Permit Fuel input

8. 7 Power plant Heat production Waste gas Coke product Iron/steel Heat Sinter product Fuel Coke Oven Blast Furnace Flare Steel rolling Basic Oxygen Furnace Continuous casting Hot stoves Steam production Hot Metal Define sub-installations A sinter product benchmark sub-installation Sintering ETS Permit Fuel input Data collection template: tab A_InstallationData

9. 8 Power plant Heat production Waste gas Coke product Iron/steel Heat Sinter product Fuel Blast Furnace Flare Steel rolling Basic Oxygen Furnace Continuous casting Hot stoves Steam production Hot Metal Define sub-installations A coke product benchmark sub-installation Sintering Coke Oven ETS Permit Fuel input

10. 9 Power plant Heat production Waste gas Coke product Iron/steel Heat Sinter product Fuel Blast Furnace Flare Steel rolling Basic Oxygen Furnace Continuous casting Hot stoves Steam production Hot Metal Define sub-installations A coke product benchmark sub-installation Sintering/ Pelletizing Coke Oven ETS Permit Fuel input Data collection template: tab A_InstallationData

11. 10 Power plant Heat production Waste gas Coke product Iron/steel Heat Sinter product Fuel Flare Steel rolling Steam production Define sub-installations A hot metal benchmark sub-installation Sintering Coke Oven Blast Furnace Basic Oxygen Furnace Continuous casting Hot stoves Hot Metal ETS Permit Fuel input

12. 11 Power plant Heat production Waste gas Coke product Iron/steel Heat Sinter product Fuel Flare Steel rolling Steam production Define sub-installations A hot metal benchmark sub-installation Sintering/ Pelletizing Coke Oven Blast Furnace Basic Oxygen Furnace Continuous casting Hot stoves Hot Metal ETS Permit Fuel input Data collection template: tab A_InstallationData

13. 12 Power plant Heat production Waste gas Coke product Iron/steel Heat Sinter product Fuel Flare Define sub-installations A heat benchmark sub-installation - exposed Sintering Coke Oven Blast Furnace Basic Oxygen Furnace Continuous casting Hot stoves Hot Metal Fuel input Steel rolling (exposed) ETS Permit Covered by heat benchmark sub-installations Heat consumption outside product benchmark sub-installations Heat export to non-ETS entities Non-covered: Heat consumption by product benchmark sub-installations Heat export to other ETS installations Heat consumption for production of electricity HBM- exposed Steam production

14. 13 Power plant Heat production Waste gas Coke product Iron/steel Heat Sinter product Fuel Flare Steam production Define sub-installations A heat benchmark sub-installation- exposed Sintering/ Pelletizing Coke Oven Blast Furnace Basic Oxygen Furnace Continuous casting Hot stoves Hot Metal Fuel input Steel rolling (exposed) ETS Permit Data collection template: tab A_InstallationData HBM- exposed

15. 14 Power plant Heat production Waste gas Coke product Iron/steel Heat Sinter product Fuel Flare Steam production Define sub-installations A fuel benchmark sub-installation- exposed Sintering Coke Oven Blast Furnace Basic Oxygen Furnace Continuous casting Hot stoves Hot Metal Fuel input Steel rolling (exposed) ETS Permit Covered by fuel benchmark sub-installation Fuel consumption outside product benchmark sub-installations Non-covered: Fuel consumption by product benchmark sub-installations Fuel consumption for production of measurable heat or electricity FBM- exposed

16. 15 Power plant Heat production Waste gas Coke product Iron/steel Heat Sinter product Fuel Flare Steam production Define sub-installations A fuel benchmark sub-installation- exposed Sintering/ Pelletizing Coke Oven Blast Furnace Basic Oxygen Furnace Continuous casting Hot stoves Hot Metal Fuel input Steel rolling (exposed) ETS Permit FBM- exposed Data collection template: tab A_InstallationData

17. 16 Power plant Heat production Waste gas Coke product Iron/steel Heat Sinter product Fuel Flare Steam production Define sub-installations Process emissions sub-installation Sintering Coke Oven Blast Furnace Basic Oxygen Furnace Continuous casting Hot stoves Hot Metal Fuel input Steel rolling (exposed) ETS Permit No process emissions sub-installations No process emissions are produced outside the boundaries of product benchmark sub-installations. There are consequently no process emissions sub-installations

18. 17 Power plant Heat production Waste gas Coke product Iron/steel Heat Sinter product Fuel Flare Steam production Define sub-installations Process emissions sub-installation Sintering/ Pelletizing Coke Oven Blast Furnace Basic Oxygen Furnace Continuous casting Hot stoves Hot Metal Fuel input Steel rolling (exposed) ETS Permit Data collection template: tab A_InstallationData

19. 18 Attribute emissions, fuel, and measurable heat to sub-installations  For allocation,  Exact data for measurable heat consumption/export is necessary for heat benchmark sub-installation  Exact data on energy input is necessary for fuel benchmark sub-installations  Exact emissions is necessary if a process emissions sub- installation would be present Nevertheless, to be able to check completeness and consistency (Art. 7.7), operators will:  In the data collection template: estimate the attribution of all other emissions, energy input and measurable heat  In the methodology report: describe the attribution

20. 19 Attribute emissions, fuel, and measurable heat to sub-installations  For allocation,  Exact data for measurable heat consumption/export is only necessary for heat benchmark sub-installation The data collection template contains a ‘simple’ and a ‘complex’ tool to determine the balance of measurable heat flows: the table below only shows the outcome of the ‘complex’ tool: Data collection template: tab E_EnergyFlows

21. 20 Attribute emissions, fuel, and measurable heat to sub-installations  For allocation,  Exact data on energy input is only necessary for fuel benchmark sub-installations Data collection template: tab E_EnergyFlows

22. 21 Attribute emissions, fuel, and measurable heat to sub-installations  For allocation,  Exact emissions would only be necessary if a process emissions sub-installation would be present Data collection template: tab D_Emissions

23. 22 Power plant Heat production Waste gas Coke product Iron/steel Heat Sinter product Fuel Flare Steel rolling Basic Oxygen Furnace Continuous casting Hot stoves Steam production Determine historical activity levels Product benchmark sub-installations (all three shown together and highlighting product flows only) Fuel input Blast Furnace Sintering Coke Oven ETS Permit Chosen baseline: 2005 - 2008 No changes in operation No significant changes in capacity HAL = median(2005 – 2008 annual production levels) Hot Metal

24. 23 Power plant Heat production Waste gas Coke product Iron/steel Heat Sinter product Fuel Flare Steel rolling Basic Oxygen Furnace Continuous casting Hot stoves Steam production Determine historical activity levels Product benchmark sub-installation Fuel input Blast Furnace Sintering Coke Oven ETS Permit Hot Metal Data collection template: tab F_ProductBM (example for sintered ore) So HAL= median (10.7, 12.5, 10.7, 7.1)=10.7 Mt

25. 24 Power plant Heat production Waste gas Coke product Iron/steel Heat Sinter product Fuel Flare Steam production Sintering/ Pelletizing Coke Oven Blast Furnace Basic Oxygen Furnace Continuous casting Hot stoves Hot Metal Fuel input Steel rolling (exposed) ETS Permit HBM- exposed Determine historical activity levels Heat benchmark sub-installation - exposed Chosen baseline: 2005 - 2008 No changes in operation No significant changes in capacity HAL = median(2005 – 2008 annual activity levels)

26. 25 Power plant Heat production Waste gas Coke product Iron/steel Heat Sinter product Fuel Flare Steam production Sintering/ Pelletizing Coke Oven Blast Furnace Basic Oxygen Furnace Continuous casting Hot stoves Hot Metal Fuel input Steel rolling (exposed) ETS Permit HBM- exposed Determine historical activity levels Heat benchmark sub-installation - exposed Data collection template: tab G_Fall-back (for heat benchmark exposed to CL) So HAL= median (5950, 7000, 5950, 4200)=5950 TJ

27. 26 Power plant Heat production Waste gas Coke product Iron/steel Heat Sinter product Fuel Flare Steam production Determine historical activity levels Fuel benchmark sub-installation- exposed Sintering Coke Oven Blast Furnace Basic Oxygen Furnace Continuous casting Hot stoves Hot Metal Fuel input Steel rolling (exposed) ETS Permit FBM- exposed Chosen baseline: 2005 - 2008 No changes in operation No significant changes in capacity HAL = median(2005 – 2008 annual activity levels)

28. 27 Power plant Heat production Waste gas Coke product Iron/steel Heat Sinter product Fuel Flare Steam production Determine historical activity levels Fuel benchmark sub-installation- exposed Sintering/ Pelletizing Coke Oven Blast Furnace Basic Oxygen Furnace Continuous casting Hot stoves Hot Metal Fuel input Steel rolling (exposed) ETS Permit FBM- exposed Data collection template: tab G_Fall-back So HAL= median (5950, 7000, 5950, 4200)=5950 TJ

29. 28 Determine preliminary total allocation Without considering carbon leakage status Sinter sub-installation: BM Sinter [EUA/t product]x HAL Sinter [Mt product] Coke sub-installation BM Coke [EUA/t product]x HAL Coke [Mt product] Hot Metal sub-installation BM Hot metal [EUA/t product] x HAL Hot metal [Mt product] Heat benchmark sub-installation: BM H [EUA/TJ heat]x HAL H [TJ heat] Fuel benchmark sub-installation: BM F [EUA/TJ fuel]x HAL F [TJ fuel] Preliminary total allocation: (not considering CL-status) Sum of the above BM:Benchmark HAL:Historical activity level EUA:Allowances The allocation without considering CL-status is needed for the Commission to determine the need for a cross-sectoral correction factor The allocation without considering CL-status is the same for each year

30. 29 Determine preliminary total allocation Without considering carbon leakage status Sinter sub-installation: 0.171 [EUA/t product]x 10.7 [Mt product] Coke sub-installation 0.286 [EUA/t product]x 3.8 [Mt product] Hot Metal sub-installation 1.328 [EUA/t product]x 9.4 [Mt product] Heat benchmark sub-installation: 62.3 [EUA/TJ heat]x 5950 [TJ heat] Fuel benchmark sub-installation: 56.1 [EUA/TJ fuel]x 5950 [TJ fuel] Preliminary total allocation: (not considering CL-status) 16.1 million allowances BM:Benchmark HAL:Historical activity level EUA:Allowances The allocation without considering CL-status is needed for the Commission to determine the need for a cross-sectoral correction factor The allocation without considering CL-status is the same for each year

31. 30 Determine preliminary total allocation Considering carbon leakage status Product benchmark sub-installationsBM P [EUA/t product] x HAL P [t product] x CLEF Heat benchmark sub-installations:BM H [EUA/TJ heat]x HAL H [TJ heat]x CLEF Fuel benchmark sub-installations:BM F [EUA/TJ fuel]x HAL F [TJ fuel]x CLEF Preliminary total allocation: (considering CL-status) Sum of the above BM:Benchmark HAL:Historical activity level EUA:Allowances CLEF:Carbon leakage exposure factor - For not-exposed sectors (80% in 2013, 30% in 2020) - For exposed sectors (100% from 2013 to 2020) The allocation with consideration of CL-status can differ from year to year The CL-status may change in the future

32. 31 Determine final total allocation (not in NIMs) Final allocation = F instal,prel. (k) x CSF (k) F instal,prel. (k):Preliminary allocation considering CL-status in year k CSF (k):Cross-sectoral correction factor in year k (if applicable) In this case the installation is not an “electricity generator” (pursuant to Art 3(u)); so: In case the installation would have been an “electricity generator”, then: Final allocation = F instal.prel (k) x LRF (k) F instal,prel. (k):Preliminary allocation considering CL-status in year k LRF (k)Linear reduction factor (1.000 in 2013 decreasing to 0.8782 in 2020)

33. 32 Thank you for your attention

34. 33 Disclaimer and copyright  The Commission is not responsible for the correctness, completeness or quality of the information provided.  The contents of these slides are based on the guidance documents as endorsed by the Climate Change Committee and by no means substitute the legal text  Any values used in examples do not necessarily reflect existing situations and are only meant for illustrative purposes.  Ecofys makes no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability with respect to the information in this presentation. Any reliance you place on such information is therefore strictly at your own risk and Ecofys is not liable for any damage whatsoever arising from the use of this information  The copyright of this presentation is reserved. It may therefore not be used for any purpose without the explicit permission of Ecofys