Low Carbon Transition

Responses to Climate Change

Climate Governance Hierarchy

The framework of CSC's climate governance is directly supervised by the Board of Directors, the top climate governance unit; the Corporate Governance and Sustainability Committee is the management unit. The Sustainable Environment Development Team and Risk Management Team of the Corporate Governance and Sustainability Committee, composed of vice presidents of departments as conveners, are responsible for handling climate change issues faced by CSC and report their progress to the Corporate Governance and Sustainability Committee regularly based on the implementation results.

Climate Change Risk Management

In response to carbon neutrality, the Task Force on Energy Saving & Carbon Reduction and Carbon Neutrality was established in February 2021 by CSC. The chairman of the Board is in charge of the oversight of climate change issues. The task force convenes quarterly and reports its progress to the Board of Directors regularly.

Results:

The chronicle of events of the Task Force on Energy Saving & Carbon Reduction and Carbon Neutrality

Dates Summaries of progress
2021.02.26
  • The Task Force on Energy Saving & Carbon Reduction and Carbon Neutrality, implementing CSC's response policies and strategic planning on carbon reduction and carbon neutrality, was established with the approval of the Board of Directors. The Chairman serves as the principal person in charge of the Task Force, and the President and the Executive Vice President serve as seconds-in-command.
2021.04.22
  • CSC set carbon reduction targets in phases. 2018 being the base year, CSC aimed to reduce emissions by 7% in the short term (2025) compared with that of the base year and 22% in the medium term (2030), and strived to reach the goal of carbon neutrality (2050).
  • The environmental, social, and governance (ESG) concept was incorporated into the carbon reduction plans. The management of carbon reduction was promoted; various carbon reduction programs, amounts of carbon reduction, promotion schedules, etc., were quantified to statistically analyze the potential and gaps of carbon reduction.
  • CCUS, referring to carbon capture, utilization, and storage technologies, is a key aspect of carbon reduction. CSC would cooperate with other industries in this regard.
2021.06.21
  • The direction and progress of CSC's current planning and promotion of R&D technology were clarified and benchmarked against those of international advanced steel mills.
  • The production processes in the existing blast furnaces and basic oxygen furnaces were improved, and smart modules were introduced, aiming to convert the blast furnaces into low-carbon ones.
2021.08.31
  • The tests of the ratios of added steel scrap in basic oxygen furnaces were planned and conducted, and related technology was developed.
  • CSC's entry into the field of innovative carbon reduction technologies, such as hydrogen metallurgy, co-production of steel and petrochemicals, etc., was confirmed and also consistent with the development trend of international steel mills.
2021.10.27
  • The promotion of the co-production of steel and petrochemicals was confirmed, the corresponding implementation organization was established, and R&D resources in technology development were invested.
  • To assist downstream customers to adapt to the trend of carbon neutrality, CSC, following the government's model of first working with major companies to lead the way for smaller companies, utilized the existing Industrial Service Corps to help the Taiwanese steel-consuming industry to enhance its capability to deal with the control of carbon emissions.
2022.01.04
  • To promote CSC Group's low-carbon strategies, educational training regarding carbon neutrality, greenhouse gas inventory, and product carbon footprints was held for first-echelon executives of the Group to enhance their competency on carbon neutrality.
  • In 2021, 251 annual carbon reduction action plans had been carried out with the amount of reduced carbon reaching 293,758 tons of CO2e/year (a reduction of 1.3%), which was higher than the carbon reduction target (1.0%).
2022.02.22
  • According to CSC's carbon reduction goals, all production units were assigned carbon reduction targets, which would be reached by management.
  • A complete carbon reduction roadmap would be thoroughly planned for the subsequent steel rolling processes, based on the roadmaps for iron making and steelmaking processes.
2022.04.18
  • Carbon reduction technology and strategy planning of carbon neutrality would be included as key exchange topics with other steel mills.
  • The test of co-injection of COG and PCI by a single blast furnace tuyere was planned in order to establish related techniques.
  • As carbon reduction is usually medium- and long-term operations, meetings of the Task Force on Energy Saving & Carbon Reduction and Carbon Neutrality would be adjusted to convene quarterly.
2022.07.20
  • Testing of applying metallic iron and HBI to blast furnaces was continued, technical specifications were systematically established, and the test results were integrated.
  • According to the 12 key strategies of the net-zero emission roadmap proposed by the National Development Council, it was confirmed that the measures taken by CSC were in line with the direction of the national policy.
2022.10.25
  • The pilot plant of “Co-production of Steel and Petrochemicals” was completed in September.
  • CSC will initiate the development of the hydrogen-rich gas injection technology in blast furnace using natural gas in 2024. Strategically position ourselves to build the necessary capabilities for future carbon reduction.
2023.01.12
  • CSC's carbon reduction performance was planned to link with the KPIs of the first-echelon executives to ensure the competitiveness of its carbon reduction.
  • The “Carbon Management Corps” was established to promote the low-carbon transformation of the steel industry chain in order to respond to the imposition of future national and international carbon taxes and fees.
2023.04.17
  • Being selected as a 1+N Carbon Management Demonstration Team by the Industrial Development Bureau, CSC was able to showcase its endeavor in leading the carbon reduction of the industry chain to the government.
  • In line with the National Development Council's revised target of a 24±1% carbon reduction by 2030, CSC also raised its medium-term (2030) carbon reduction target from the original 22% reduction to 25% compared with that of the base year.
2023.07.26
  • In consideration of the fairness of industrial competition, CSC has conducted a study on the imposition of carbon fees on international metallurgical coal and coke. The findings are provided as a reference for the Ministry of Economic Affairs and the Ministry of Environmental.
  • CSC has conducted an analysis of the Commission Implementing Regulation of CBAM, and will follow the rule to allocate the carbon intensity of our company's products.
2023.10.25
  • CSC is providing case guidance to downstream customers with intricate contract manufacturing processes, helping them to develop a CBAM declaration template tailored to the entire fastener industry.
  • CSC will initiate the development of the blast furnace hydrogen-enriched gas injection technology using natural gas in 2024. To build the necessary capabilities for future carbon reduction.
2024.01.30
  • The first phase of Co-production of Steel and Chemicals has achieved the set technical goals. Subsequently, efforts will continue to be devoted to reducing the costs of CO/CO2 and purification.
  • In 2024 CSC plans to assist 20 downstream customers in implementing carbon management.
2024.04.15
  • The pilot plant for flue gas carbon capture at China Steel Corporation is scheduled to complete construction in August 2024 with an expected annual carbon capture capacity of 500 metric tons.
  • CSC plans to establish two demonstration production lines of Co-production of Steel and Chemicals capable of capturing 350,000 tons of CO annually within the China Steel Corporation plant by 2029. The demonstration lines are expected to meet the demand of the chemical industry to produce 700,000 tons of acetic acid per year.
2024.07.04
  • CSC is continuously developing controlling technology for charging low-carbon iron sources into blast furnace to enhance carbon reduction benefits.
  • CSC has established reward rules for greenhouse gas reduction to encourage all employees to actively engage in carbon reduction efforts.

Assessment of climate change risks and opportunities

Following the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), CSC has identified the risks and opportunities brought about by climate change in various departments, and then effectively responded to a wide range of issues derived from climate change. Climate-related risks have been integrated into CSC's overall risk management framework. The following is a detailed description of the procedures for identifying major climate change risks and opportunities:

Transition Risk Scenario Analysis

CSC referenced the research report proposed by the International Energy Agency (IEA) to discuss our transition plan based on the evolving technological pathways within the global steel industry and potential external market changes. We examine the parameters of the Net Zero Emissions (NZE) and Announced Pledges Scenarios (APS) separately. Continuing our previous framework for transition risk scenario analysis, CSC approaches from the perspectives of various stakeholders, taking into account the actions these stakeholders might take in different scenarios. This approach aims to proactively address potential risks or seize emerging market opportunities. A detailed framework for transition risk scenario analysis by CSC is depicted in the figure below:

Physical Risk Scenario Analysis

CSC conducts scenario analysis of future occurrences of more frequent physical risks in the value chain, utilizing scenarios outlined by the Intergovernmental Panel on Climate Change (IPCC), specifically the high emissions scenario (SSP5-8.5) and the intermediate emissions scenario (SSP2-4.5). Leveraging the climate impact driver framework employed by IPCC Working Group I, CSC identifies physical risks that the value chain may encounter. Based on climate scenario data and information on hazard risk, combined with assessment results from various locations, these values are consolidated into a climate risk matrix. CSC’s analysis process of physical risks is as follows:

Matrix of climate-related risks

Order of Priority Category Risk Factor
1 Market Transition of raw materials.
2 Policy & Regulation Implementation of carbon fee mechanism.
3 Policy & Regulation Planning of low-carbon energy policy.
4 Technology R&D of carbon neutral technology of the steel industry.
5 Market Changes in steel demand from downstream customers.
6 Policy & Regulation Implementation of the Carbon Border Adjustment Mechanism (CBAM).
7 Acute Extreme weather events, such as typhoons and floods (Raw materials).
8 Acute Extreme weather events, such as typhoons and floods (Operations).
9 Chronic Water shortages caused by changing climate patterns.
10 Reputation Investors/Financial institutions’ willingness to invest in and provide loans to CSC.
11 Acute Extreme heat/dry wildfire events(Raw materials).
12 Chronic Rising sea levels causes the flooding of low-lying areas.

The matrix of climate-related opportunities

Order of Priority Category Opportunity Factor
1 Market Entry to renewable energy/automotive related supply chains.
2 Products and Services Provision of high-strength steel to enhance climate resilience.
3 Resource Efficiency Reduction of crude steel energy consumption through smart manufacturing energy saving.
4 Products and Services Provision of low-carbon steel products to downstream industries.
5 Market Compliance with requirements of financial institutions to obtain low interest rates.
6 Energy Sources Expansion of energy storage-related facilities.
Mitigation of risks in low-carbon transition and seizing the corresponding opportunities Strategies for climate change adaptation

Greenhouse Gas Inventory (Scopes 1~3)

Every year, CSC entrusts a third-party agency certificated by the MOENV to verify CSC’s annual GHGs emission inventory, and obtains statement documents. GHG information of 2023 is shown below.

GHG emissions（Unit: tCO2e） 2021(III) 2022 2023
Direct GHG emissions
(Scope 1)		 20,939,573 18,248,901 16,809,455
Indirect GHG emissions from imported energy
(Location-based Scope 2)		 1,357,456 1,373,685 1,263,333(VI)
Indirect GHG emissions from imported energy
(Market-based Scope 2)		 1,357,456(III) 1,373,673 1,249,102(VI)
Total emissions(I)(II) 22,297,029 19,622,574 18,058,557
Other Indirect Emissions
(Scope 3) 		12,055,837 11,216,225 11,317,609
（Unit: tCO2e） 2021 2022 2023
Other indirect GHG emissions in total(Scope 3) 12,055,837 11,216,225 11,317,609
Indirect GHG emissions from transportation Upstream transportation and distribution for goods(V) 683,165.24 482,727.62 423,018.44
Business travels 62.27 82.37 187.34
Employee commuting 5,037.38 5,005.56 4,984.61
Downstream transportation and distribution for goods 282,275.03 348,553.11 390,072.27
Indirect GHG emissions from products used by an organization Purchased goods and services 144,440.62 147,361.03 125,993.17
Capital goods 203.70 543.91 1,017.74
Fuel-and-energy-related activities (not included in Scopes 1 or 2) 1,065,448.28 1,118,068.66 1,012,053.87
Waste generated in operations 2,323.32 5,263.81 1,408.56
Upstream leased assets 164.05 165.39 187.45
Indirect GHG emissions associated with the use of products from the organization Processing of sold products 208,819.42 122,055.76 115,728.50
Use of sold products 488.54 0 227.06
End-of-life treatment of sold products 52,283.00 5,366.03 5,636.75
Downstream leased assets 607.32 614.32 1,705.03
Franchises 778.49 931.04 716.72
Investments 9,609,740.49 8,979,486.07 9,234,671.21

  1. The boundary of CSC’s GHG emissions refers to the Operation Control Approach, including critical operating sites such as Head Office and China Steel Building. The emissions are calculated using Emission Factors Methodology, and the GHG considered include carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulfur hexafluoride and nitrogen trifluoride. After the completion of CSC China Steel Building in 2013, we adjusted our GHG inventory boundary in accordance with ISO 14064-1 and reset our base year to 2014. The GHG emissions of 2014 was 20,629,824 tCO2e, based on the GWP value from the IPCC's Fourth Assessment Report. The source of the coefficient includes the emission coefficient management table announced by the MOENV, the World Steel Association coefficient, and the estimated emission coefficient of the carbon content measured by the plant.
  2. Total emissions are calculated based on Scope 1 emissions and market-based Scope 2 emission data.
  3. The data of scope 2 is recalculated based on the electricity emission factor of 2022.
  4. Since 2021, CSC has conducted its GHG inventory in accordance with ISO 14064-1:2018. CSC’s GHG report is verified by third party verification agency, DNV, with a reasonable level of assurance.
  5. The scope of the disclosed GHG information is CSC’s individual company.
  6. During the 2023 verification process, DNV has confirmed that 28,809,461 kilowatt-hours of renewable energy were uesd.
    For market based(1,249,102), the renewable energy from solar and wind power emissions factor of 0 was calculated based on Greenhouse Gas Emissions Inventory published by the Taiwan Ministry of Environment.
    For location based(1,263,333), the renewable energy from solar and wind power emissions factor of 0.494 was calculated based on Taiwan National electricity emission factor.
Carbon Reduction Pathways

CSC has set short-, medium-, and long-term carbon reduction goals. With the long-term goal of achieving carbon neutrality by 2050, CSC has preliminarily formulated a number of strategies and mapped its pathways towards carbon neutrality. In the short-term, CSC has mainly planned to increase the use of renewable energy and step up efforts to improve energy efficiency.It had completed 221carbon reduction action plans with carbon emissions reduced by 2.8% or 626,000 tons/year in 2022, and 223 carbon reduction action plans with carbon emissions reduced by 1.6% or 358,000 tons/year in 2023, respectively. As for the medium- and long-term pathways towards carbon neutrality, the goal of reducing carbon emissions will be reached by 25% in 2030 compared with that in 2018 by applying reduced iron to the blast furnaces, replacing coal injection with hydrogen, co-production between steel and petrochemical plants, increasing scrap use. There are four pathways towards carbon neutral after 2030, namely electrification of equipment, carbon-free fuels, CCUS, and hydrogen reduction process, with carbon reduction tasks in ten aspects.

CSC Path Planning for Carbon Reduction and Carbon Neutral




Mid to-Long Term Two-Stage Carbon Neutral Path Planning

Climate-Related Management Incentives

CSC has established the “Greenhouse Gas Reduction Incentives program” to encourage employees from relevant departments (for example, the ironmaking, steelmaking, and engineering departments of CSC) to participate in carbon reduction activities.

  • 1. Employees can propose GHG reduction plans. Upon achievement, monetary award (cash bonus) will be given based on the actual reduction amount.
  • 2. Additionally, if relevant departments meet their targets, all employees within the department are entitled to receive a corresponding monetary award (in cash). Achieving the target consecutively for three years would be rewarded with an additional cash bonus.
Carbon Neutrality

CSC has also mapped out a two-stage pathway to ensure that it will achieve the goal of carbon neutrality. However, CSC currently lacks mature technology, hydrogen resources, and the need for equipment revamp, and it will eventually face challenges in three areas, namely, technology, resources, and costs, which are also similar to those faced by other steel mills globally. Therefore, CSC will actively engage in the R&D operations while continuously reviewing and adjusting the progress of each strategy with rolling wave planning.

Internal Carbon Pricing

In response to the trend of carbon pricing, CSC implements the internal carbon pricing as a corporate governance tool of carbon reduction. We periodically review the internal carbon pricing which is based on external carbon tax, expected carbon fee or the cost of carbon reduction, also dynamically adjusts to the plan of pathway to carbon neutrality and global climate policy.
Besides calculating carbon emission costs and conducting sensitivity analysis, internal carbon pricing is also able to effectively evaluate the benefits of capital expenditures or R&D expenses of carbon reduction. So that it has the advantage of effectively controlling the company's overall carbon emissions, and driving the improvement of internal operations and production processes, or development of technologies with lower carbon emissions.

Carbon Credits Management and GHG Offset Project

CSC has formulated the “Carbon Trading and Management Regulations” in accordance with MOENV's rules and regulations as well as international practices, with the relevant operations incorporated into ISO 14001 Environmental Management Systems. Meanwhile, applications for GHG offset credits are submitted by the Environmental Protection Department at CSC to the competent authority. As of the end of 2023, CSC has 4.5021 million tonnes of CO2e in GHG offset credit balance.

Carbon Footprints

In response to climate change, verifying and disclosing the carbon footprints of enterprises have gradually become major issues that stakeholders pay attention to. In order to update carbon footprint information and establish a more comprehensive carbon management mechanism, CSC has implemented and successfully completed the carbon footprint inventory of 23 major product categories, such as that of hot-rolled steel coils, with the joint efforts of all production units. It was granted an external verification opinion statement by BSI on November 23, 2022.

During the internal verification process, CSC was repeatedly faced with factors, such as the inconsistency of the sources of the supporting data. Therefore, it was necessary for CSC to establish an inventory management system that would link the existing information system to expedite the calculation of carbon footprints, reduce on-site workload of manpower, and then manage through the system, which was an important tool, by monitoring the statuses of carbon emissions in the production plants.

In response to the gradually emerging carbon tariffs and the trendy issue of carbon neutrality, various industrial companies with brand recognition have been competing to set carbon neutrality goals, and their supply chains have also responded by investing in establishing product carbon emission baselines and reducing carbon emissions. CSC, as a major international supplier of steel products, will continue to conduct carbon footprint verification to better understand the degree of carbon exposure. Furthermore, it will meet the expectations of the authorities, customers, and the supply chains, work collectively with the aforementioned parties in terms of sustainability and the reduction of carbon emissions, respond to inquiries from investors or customers, and understand carbon risk exposure.

Verification Opinion Statement

The carbon footprint of hot-rolled coils is 2.151 kgCO2e/kg.

Carbon Neutral Capital Expenditure
  • In 2023, the total capital expenditure related to carbon reduction will be approximately NT$3.827 billion.
  • According to the company's plan for 2025~2030, the four medium-term carbon reduction paths include charging reduced iron into the blast furnaces, injection of hydrogen-rich gas in the blast furnaces, co-production of steel and chemicals, and increasing the use of scrap. After CSC conducts initial inventory, we estimates a total capital expenditure of around NT$40.8 billion. The amount will be modified in accordance with future technological advancements and will submit to the boards based on progress of each project.