Adapting to ultra-low emissions in the steel industry is important for the Chinese economy’s high-quality development, and the authorities should give more incentives to steelmakers with high-level environmental protection records while strictly containing unclean capacity, a top China Iron and Steel Association official said.

“Overcapacity is a concern to us, but we care more about whether clean capacity is enough (for environmental protection),” CISA Executive Vice-Chairman He Wenbo said at a forum in Beijing on the low-carbon emissions prospects of the Chinese steel industry, China Daily reported.

Promoting ultra-low carbon emissions is necessary to ensure green development in the steel sector, and production restrictions in key areas, including the Beijing-Tianjin-Hebei region, are a last resort, without alternatives. However, production restrictions should vary among steel companies, which have different environmental protection records. Those with advanced capacity and innovative technologies should be protected and supported, he said.

To meet steel demand and protect the environment, it is proper that steel producers with ultra-low carbon emissions make more use of their capacity, while unclean capacity is curbed, he said.

“To realize ultra-low carbon emissions, some steel companies spend up to 270 yuan (US$40) per ton in operational costs,” he said.

“The incentive mechanism must take account of the high environmental protection costs of companies with advanced and clean capacity.”

In the first five months of 2019, crude steel output increased by 37.44 million tons, or 10.2% year-on-year, and 98% of the incremental output was domestically used, the report said.

However, members of the CISA, which are mostly mid-sized to large steel enterprises, and which account for 80% of the national output, registered a year-on-year output growth of only 6.2% in the first five months, while the crude production from non-members rose 23%.

More than half of the increased output in the first five months this year was from non-CISA members, whose clean capacity cannot be guaranteed, he emphasized.

Liu Bingjiang, head of the Ministry of Ecology and Environment’s air quality management department, said at the same forum that it is unfair for companies with high operational costs on environmental protection to compete under the same market conditions against those investing little into environmental protection, the report said.

The authorities will bring in industrial associations to tighten emissions assessment on steel producers when granting exemptions from production restrictions, he said.

Those with poor environmental protection records or that scheme to cheat the assessment will be severely punished, he said.

Currently, China enforces steel production restrictions in key areas on days forecast to have heavy air pollution, and producers with ultra-low carbon emissions are allowed to have lower or no production cuts.

More than 60 steel producers in key areas, with a total crude steel capacity of 260 million tons, have upgraded to meet ultra-low carbon emission standards, according to Liu.

China expects 60% (340 million tons) of existing crude steel capacity in key areas to be made with ultra-low carbon emissions by 2020, according to a ministry guideline released this year.