Heavy industries like cement, steel and aluminium that have traditionally relied on carbon-intensive fuels like petroleum coke are increasingly seeking replacements as the EU moves into the next phase of its carbon pricing regimen in 2026, delegates heard at the Argus Global Coke and Carbon Conference.
Although the EU's Emissions Trading System (ETS) has been in place since 2005, companies in emissions-heavy sectors were initially provided free allowances in proportion to their production. But free allowances are set to be phased out starting next year, meaning companies will now have to pay for up to 20-30pc of their emissions, which "creates urgency for the first time", Javelin's head of biomass Thomas Meth said at the conference in Washington, DC, late last month. ETS credits are currently in the €70s/t of CO2 equivalent (CO2e).
There is also a steep reduction in free allowances to zero by 2035, and a target of 62pc emissions reduction by 2030. This target means the carbon price is expected to rise to €150/t of CO2e by 2030, DYM's Yury Burenko said.
European companies have been preparing for the regulations for several years by increasingly substituting fossil fuels like coke and coal with alternative waste fuels. The European cement industry is already using 65pc alternative fuels, Ciplan's procurement manager Rodrigo Santana told the conference. Cement companies are also investing in plant efficiency and replacing energy-intensive clinker production with other cementitious materials like fly ash, slag and calcined clay.
But another key new development starting next year is that the bloc is set to begin the Carbon Border Adjustment Mechanism (CBAM) to apply these costs to producers outside the EU that seek to supply imports. This is contributing to increased interest in emissions reduction from plants in countries outside of the EU, like Japan.
Japanese steel producers are testing options to replace pulverized coal injection (PCI) coal in their production process with options like biocarbon, a fuel made from wood, Meth said. This fuel contains 25-32 MJ/kg (5,975-7,648 kcal/kg), 3-8pc moisture, 60-95pc fixed carbon and 45-55 HGI. But the biocarbon production supply chain is early in its development, with Javelin expecting to bring the production infrastructure online by the fourth quarter, complete trial volumes of 200-20,000t in the first half of next year and produce 50,000t/yr by the end of 2026, depending on customer commitments.
The CBAM policy's aim of leveling the playing field for European producers could be coming too late for the steel industry, however, which had by 2024 lost almost 56mn t/yr of crude steel production capacity since 2008 and 21mn t/yr since 2019, director of market analysis and economic studies for the European Steel Association Eurofer Alessandro Sciamarelli told the conference. This was in part because of higher energy prices and overall production costs compared with other major steel making regions. The steel market in Europe appears to be becoming a structural net importer for finished steel products as it has been in a widening deficit for the past eight years, a trend which will not necessarily reverse with the implementation of CBAM.
Although the rising cost of carbon emissions may lead some companies to reduce their petroleum coke consumption, the lower heat content of many alternative waste fuels and the high cost of biomass-based fuels, will also support demand for coke compared with other high-emissions fuels like coal. Coke not only has a high calorific value (CV) that can boost efficiency of lower CV waste products, but it is typically available at a lower cost than coal. Coke will be the last fuel we substitute, one Turkish cement maker said on the sidelines of the conference.
Petroleum coke is also a valuable source of carbon for applications that require this element. While biocarbon can be used to make higher fixed carbon products for metallurgical industry uses, the cost "is not linear — it's an exponential curve", Meth said. Javelin plans to create a biocarbon petroleum coke blend at its facility in Alabama.
