Appendix E - Calculation Methods Appendix

Appendix E
Calculation Methods Appendix $-$ Part II.D

II.D. Emissions Embedded in Material Inputs

As described in chapter 3 (“Emissions Embedded in Material Inputs from External Sources (Scope 3)”), the Commission calculated each facility’s scope 3 emissions by multiplying certain activity data $—$ material receipts or in some cases material use data $—$ by scope 3 emissions factors specific to those materials. This section describes how scope 3 emissions were calculated for specific materials used by steel and aluminum producers. In addition, this section describes how scope 3 emissions were allocated to unit processes.

II.D.1. Calculation of Facility-Level Scope 3 Emissions

At the most basic level, a facility’s scope 3 emissions are calculated for each material ( $m a t e r i a l$ ) it received from external sources in 2022 based on equation E.42.

$\begin{matrix} S 3_{m a t e r i a l} = R e c e i p t s_{m a t e r i a l} * E F_{m a t e r i a l} (E .42) \end{matrix}$

$S 3_{m a t e r i a l}$ refers to total GHG emissions, measured in mt of CO₂e, that occurred during the partial life cycle of that material in external upstream facilities.

$R e c e i p t s_{m a t e r i a l}$ is the activity data covering external receipts or use of the material in 2022, generally measured in metric tons of material received or used for solid materials and in standard cubic feet for gaseous materials.547F[544]

$E F_{m a t e r i a l}$ refers to the emissions factor, or the amount of GHG emissions, measured in metric tons of CO₂e, that occurred during the partial life cycle of that material in external upstream facilities for every unit that was produced.

Equation E.42 is more complex for certain materials depending on the amount of information available, whether a “multi-source approach” or “global approach” is used, the production pathways of those materials, and whether alternative emissions factors are available for performing those calculations.548F[545] Derivatives of equation E.42 and associated sources of information are described in greater detail below for all materials in the steel and aluminum system boundaries.

II.D.1.a Approaches for Materials Used in the Steel System Boundary

The Commission calculated scope 3 emissions for facilities producing covered steel products for each material received from external sources by those facilities. Four different calculation approaches that were derivatives of equation E.42 were used, applying to four groups of materials. These groups are listed in table E.9.

Table E.9 Material groups used for calculating scope 3 emissions for facilities producing covered steel products

Material categories	Material group and equation index term
Metallurgical coke, calcined lime, calcined dolime, iron pellets, direct reduced iron, carbon electrodes, oxygen, nitrogen, argon, and hydrogen	Material group 1 ( $m a t e r i a l 1$ )
Non-calcined limestone and dolomite, ferroalloys and other alloying metals, and coating materials	Material group 2 ( $m a t e r i a l 2$ )
Pig iron	Material group 3 ( $p i g$ )
All steel products used as materials	Material group 4 ( $s t e e l$ )

Source: Compiled by the USITC.

II.D.1.a(1) Scope 3 Emissions for Steel Materials Group 1: Global Approach Using Receipts Data

Materials group 1 includes metallurgical coke, calcined lime, calcined dolime, iron pellets, direct reduced iron, carbon electrodes, oxygen, nitrogen, argon, and hydrogen.549F[546] Facilities reported external receipts for each of these materials in the questionnaire.550F[547] For each material in material group 1 ( $m a t e r i a l 1$ ), the Commission used a global approach to calculate $S 3_{m a t e r i a l 1}$ (see equation E.43) using total material receipts from all sources ( $R e c e i p t s_{m a t e r i a l 1}$ ) as activity data and global emissions factors ( $D e f a u l t E F_{m a t e r i a l 1, g l o b a l}$ ).

$\begin{matrix} S 3_{m a t e r i a l 1} = R e c e i p t s_{m a t e r i a l 1} * D e f a u l t E F_{m a t e r i a l 1, g l o b a l} (E .43) \end{matrix}$

II.D.1.a(2) Scope 3 Emissions for Steel Materials Group 2: Global Approach Using Use Data

Materials group 2 includes limestone, ferroalloys and other alloying metals, and coating metals ( $m a t e r i a l 2$ ). As with material group 1, the Commission used a global approach to calculate $S 3_{m a t e r i a l 2}$ for each of these materials. Unlike the materials in group 1, the Commission assumed based on discussions with industry representatives that facilities producing covered steel products were unlikely to produce the materials in group 2.551F[548] Therefore, in lieu of external receipts, the Commission used the total quantity of material use ( $\sum_{s u b p r o c} U s e_{m a t e r i a l 2, s u b p r o c}$ ) as activity data in the calculation of $S 3_{m a t e r i a l 2}$ in order to avoid asking facilities for the same type of data multiple times (see equation E.44).552F[549] Like group 1, $D e f a u l t E F_{m a t e r i a l 2, g l o b a l}$ was used.553F[550]

$\begin{matrix} S 3_{m a t e r i a l 2} = \sum_{s u b p r o c} U s e_{m a t e r i a l 2, s u b p r o c} * D e f a u l t E F_{m a t e r i a l 2, g l o b a l} (E .44) \end{matrix}$

The metal products included in this group generally have high embodied emissions; however, the Commission used a global approach to calculating scope 3 emissions for these materials for several reasons. Although alloying or coating metals may have a substantial impact on the emissions intensity of stainless, high-alloy, or coated steel products, the use of each of these metals by steel facilities varied widely. Given the dozens of alloying and coating metals for which data were collected in the questionnaire, the Commission decided not to further increase the burden on facilities by also asking them to report the sources of these metals. However, the questionnaire requested facilities producing stainless steel products to provide data for a wide variety of ferroalloys and other alloying metals in order to better capture the impact of varying rates of use of each of those materials on the emissions intensities of stainless steel product categories (see box E.3).

Box E.3 Measurement of Scope 3 Emissions for Ferroalloys and Other Alloying Metals

Facilities reported use of ferroalloys and other alloying metal inputs in the broad “steelmaking” subprocess. Primary alloy inclusion in steel production typically occurs during the refining process after the production of steel in an EAF or BOF. During refining, the liquid steel is stirred with an inert gas such as argon to clean the steel of impurities. From there, the chemistry of the steel is further fine-tuned by adding alloys and other additions as needed. After this process, the steel is sent to casting.^a

Facilities reported all ferroalloy and other alloying metal use, but with different levels of specificity depending on the type of steel being produced at the facility. Where a facility produced stainless steel or a mix of stainless and carbon and alloy steels, it was asked to report material use quantities for 17 different categories of ferroalloys and other alloying metals.^bWhere a facility produced only carbon and alloy steel, it was asked to report material use quantities for three different categories of ferroalloys and other alloying metals.^cIn both cases, facilities were also asked to report use of all nonlisted ferroalloys and other alloying metals within a category called “all other ferroalloys and other alloying metals.”

Using equation E.44, the quantity of each ferroalloy and other alloying metal used by the facility is multiplied by a default scope 3 emissions factor corresponding with that material. The alloying metals tracked under “all other ferroalloys and other alloying metals” are multiplied by the global default emissions factor associated with pig iron production. A pig iron emissions factor is used for this remainder category of alloying metals for three reasons:

· The emissions factor will assign a standardized emissions burden to activity data corresponding with use of unspecified alloying metals, which avoids systematic undercounting of the emissions associated with the use of these metals.^d

· The use of a pig iron emissions factor (rather than a semifinished steel emissions factor) avoids double counting the emissions associated with the alloys themselves, and the electricity used to create steel that includes the alloys.

· This method is used by reputable third-party sources on emissions accounting.^e

The decision to track a much higher number of ferroalloys for facilities with stainless steel production was based on the expectation of a higher alloy use, and thus higher contribution of alloys to the scope 3 emissions, by those facilities.^f Stainless steels contain a higher share of ferroalloys and alloying metals due to the characteristics of the steel.^g Therefore, greater specificity in data collection for facilities with stainless steel production captured the unique scope 3 emissions profile of these products which have a higher share of ferroalloys and other alloying metals by weight.

By contrast, most facilities with production of carbon and alloy steel will generally use only a small amount of ferroalloys and other alloying metals relative to other metallic inputs (i.e., scrap, pig iron, and direct reduced iron).^h The Commission chose to use less specificity in data collection for these facilities, with concerns about the reporting burden on respondents outweighing any anticipated gains to the accuracy of accounting of the scope 3 emissions associated with inclusion of a greater variety of ferroalloys and other alloying metals. However, the low quantities of alloying metals used by facilities producing only carbon and alloy steel likely resulted in negligible effects on overall emissions intensities of products made by these facilities or across the industry.ⁱ

^aAIST, “AIST Steel Wheel,” accessed November 5, 2024.

^bFerroalloys and other alloying metals tracked for stainless steel are ferrochromium, chromium metal, other forms of chromium, ferronickel, nickel metal, nickel pig iron, other forms of nickel, ferromanganese, manganese metal, ferromolybdenum, molybdenum metal, other forms of molybdenum, ferrosilicon, silicomanganese, silicon metal, ferrovanadium, aluminum metal, and copper metal.

^cThe ferroalloy and other alloying metals tracked for carbon and alloy steels are ferrochromium, ferronickel, and ferromanganese, the same ferroalloys tracked by the European Union Carbon Boarder Adjustment Mechanism (CBAM) as precursor materials for semifinished steel and iron or steel products. EC, DG-TAXUD, CBAM Guidance for Installations, December 8, 2023, 57.

^dIf instead of a pig iron emissions factor no emissions factor was applied to this remainder category of alloying metals, the emissions intensity of steel products made by these facilities would be lower if they used more alloying metals rather than iron and scrap. The Commission elected to assign a default emissions factor to these inputs to ensure the Commission was accounting for embodied emissions associated with their inputs.

^eResponsibleSteel, ResponsibleSteel International Production Standard: Version 2.1, May 21, 2024.

^fSSINA, written submission to the USITC, December 21, 2023, 3; U. S. Steel, written submission to the USITC, December 21, 2023, 9; Outokumpu, written submission to the USITC, November 21, 2023, 27.

^gStainless steel is defined as steel containing majority iron, a chromium alloying element and other alloying elements (often chromium at 11 percent by weight or more). worldstainless, “Introduction to Stainless Steels,” accessed November 8, 2024.

^hUSITC, hearing transcript, December 7, 2023, 154 (testimony of Jeff Becker, U. S. Steel); Remus et al., Best Available Techniques (BAT) Reference Document, January 24, 2013, 369, 429.

ⁱFor facilities making only high alloy types of carbon and alloy steel but not stainless steel, the effects on the overall emissions intensity calculations of lower specificity of data for alloying metals was likely more substantial. However, output from these high alloy producing facilities were likely substantially lower than for facilities producing other carbon steel products. Therefore, the effect on industry-wide emissions intensity of any inaccuracies associated with collecting data for only a few ferroalloys was likely minimal.

II.D.1.a(3) Scope 3 Emissions for Steel Materials Group 3: Pig Iron

Pig iron ( $p i g$ ) receipts are one of the most substantial sources of scope 3 emissions for steel facilities, and the Commission therefore prioritized development of a multisource approach to estimating $S 3_{p i g}$ . In addition to asking for external receipts of pig iron from specific countries ( $R e c e i p t s_{p i g, c o u n t r y}$ ), the questionnaire asked consuming facilities for their external receipts of pig iron from specific U.S. suppliers ( $R e c e i p t s_{p i g, s u p p l i e r}$ ).554F[551] The Commission also developed corresponding country-specific emissions factors ( $D e f a u l t E F_{p i g, c o u n t r y}$ ) and supplier-specific emissions factors ( $E F_{p i g, s u p p l i e r}$ ) for pig iron. Country-specific emissions factors were based on the partial life cycle inventory (LCI) approach described in appendix F (“Development of Default Emissions Factors for Materials Used by Steel Facilities”). Supplier-specific emissions factors were calculated from emissions intensity estimates for pig iron from individual steel facilities producing this material.

If a consuming facility received pig iron from another U.S. facility that produced pig iron and responded to the questionnaire, the Commission used $E F_{p i g, s u p p l i e r}$ in lieu of a default emissions factor to calculate scope 3 emissions associated with receipts from that supplier facility ( $S 3_{p i g, s u p p l i e r}$ ) using equation E.45.

$\begin{matrix} S 3_{p i g, s u p p l i e r} = R e c e i p t s_{p i g, s u p p l i e r} * E F_{p i g, s u p p l i e r} (E .45) \end{matrix}$

For all other identified sources of pig iron, including from specified import partner countries, unidentified U.S. sources, or identified U.S. suppliers who did not respond to the questionnaire or indicate the production of pig iron, no supplier-specific emissions factor was available. The Commission calculated scope 3 emissions associated with those sources on a country-specific basis ( $S 3_{p i g, c o u n t r y}$ ) using $D e f a u l t E F_{p i g, c o u n t r y}$ using equation E.46. Where the consuming facility reported receipts of pig iron from unknown sources or imports from unidentified countries, a global emissions factor was used.

$\begin{matrix} S 3_{p i g, c o u n t r y} = R e c e i p t s_{p i g, c o u n t r y} * D e f a u l t E F_{p i g, c o u n t r y} (E .46) \end{matrix}$

All country- and supplier-specific scope 3 emission calculations were summed to get total facility-level scope 3 emissions for pig iron ( $S 3_{p i g}$ ) (see equation E.47).

$\begin{matrix} S 3_{p i g} = \sum_{s u p p l i e r} S 3_{p i g, s u p p l i e r} + \sum_{c o u n t r y} S 3_{p i g, c o u n t r y} (E .47) \end{matrix}$

II.D.1.a(4) Scope 3 Emissions for Steel Materials Group 4: Steel Products

As with pig iron, steel products ( $s t e e l$ ) used as materials in the production of other steel products are themselves substantial contributors to steel facilities’ scope 3 emissions. To calculate $S 3_{s t e e l}$ for each steel product, the Commission used a similar multisource approach to that used for pig iron for materials group 5, combining supplier-specific and country-specific calculations. Also, because the emissions intensity of steel is substantially different depending on the production pathway used (i.e., whether steel is produced using an EAF versus a BOF), the Commission used information regarding the production pathway of steel from specific sources.

As with pig iron, consuming facilities reported their receipts of steel products from other U.S. supplier facilities ( $R e c e i p t s_{s t e e l, s u p p l i e r}$ ).555F[552] Where those U.S. supplier facilities themselves responded to the questionnaire and reported steel production, the Commission calculated a corresponding supplier-specific emissions factor ( $E F_{s t e e l, s u p p l i e r}$ ). Scope 3 emissions associated with receipts of the steel material from that supplier ( $S 3_{s t e e l, s u p p l i e r}$ ) were based on equation E.48.

$\begin{matrix} S 3_{s t e e l, s u p p l i e r} = R e c e i p t s_{s t e e l, s u p p l i e r} * E F_{s t e e l, s u p p l i e r} (E .48) \end{matrix}$

Facilities also reported quantities of receipts of steel products from specific countries ( $R e c e i p t s_{s t e e l, c o u n t r y}$ ), where the source country was defined as the country of melt and pour.556F[553] Facilities reported not only the source of these steel products based on the country of melt and pour, but also estimates of the shares of steel from each country based on whether the steel was melted and poured in an EAF facility ( $E A F s h a r e_{c o u n t r y}$ ) or a BOF facility ( $B O F s h a r e_{c o u n t r y}$ ). In order to use these production pathway specific activity data, the Commission calculated default emissions factors that were both pathway- and country-specific ( $D e f a u l t E F_{s t e e l, e a f, c o u n t r y}$ and $D e f a u l t E F_{s t e e l, b o f, c o u n t r y}$ ) using the partial LCI approach described in appendix F (“Development of Default Emissions Factors for Materials Used by Steel Facilities”). Equations E.49 and E.50 show how scope 3 emissions associated with receipts of steel melted and poured in EAF facilities ( $S 3_{s t e e l, e a f, c o u n t r y}$ ) and BOF facilities ( $S 3_{s t e e l, b o f, c o u n t r y}$ ) were calculated.

$\begin{matrix} S 3_{s t e e l, e a f, c o u n t r y} = R e c e i p t s_{s t e e l, c o u n t r y} * E A F s h a r e_{c o u n t r y} * D e f a u l t E F_{s t e e l, e a f, c o u n t r y} (E .49) \end{matrix}$

$\begin{matrix} S 3_{s t e e l, b o f, c o u n t r y} = R e c e i p t s_{s t e e l, b o f, c o u n t r y} * B O F s h a r e_{c o u n t r y} * D e f a u l t E F_{s t e e l, b o f, c o u n t r y} (E .50) \end{matrix}$

The equations above could not be used to calculate scope 3 emissions associated with receipts from import partner countries without accompanying estimates of the production pathway for that steel, unidentified U.S. sources, or identified U.S. suppliers who did not report production of the steel product ( $R e c e i p t s_{s t e e l, u n k, c o u n t r y}$ ). The Commission calculated scope 3 emissions associated with those sources on a country-specific basis ( $S 3_{s t e e l, u n k, c o u n t r y}$ ) using a country-specific emissions factor that was not pathway specific ( $D e f a u l t E F_{s t e e l, c o u n t r y}$ ) using equation E.51.557F[554] Where the consuming facility reported receipts of steel from unknown sources or imports from unidentified countries, a global emissions factor was used.

$\begin{matrix} S 3_{s t e e l, u n k, c o u n t r y} = R e c e i p t s_{s t e e l, u n k, c o u n t r y} * D e f a u l t E F_{s t e e l, c o u n t r y} (E .51) \end{matrix}$

$S 3_{s t e e l}$ was calculated as the sum of all parts described above using equation E.52.

$\begin{matrix} S 3_{s t e e l} = \\ \sum_{s u p p l i e r} (S 3_{s t e e l, s u p p l i e r}) + \\ \sum_{c o u n t r y} (S 3_{s t e e l, e a f, c o u n t r y} + S 3_{s t e e l, b o f, c o u n t r y} + S 3_{s t e e l, u n k, c o u n t r y}) (E .52) \end{matrix}$

II.D.1.b Approaches for Materials Used in Aluminum System Boundary

The aluminum scope 3 emissions in this investigation were calculated using four approaches covering different materials or groups of materials. Table E.10 summarizes the materials and which of the four approaches was used to estimate scope 3 emissions, which are described in further detail in the following section.

Table E.10 Aluminum calculation methods used for scope 3 materials

Material categories	Materials group allocation and equation index term
Primary unwrought aluminum (U.S.)	Materials group 1 ( $a l u m i n u m$ )
Secondary unwrought aluminum (U.S.), wrought aluminum (U.S.)	Materials group 2 ( $m a t e r i a l 2$ )
Alloys, calcined petroleum coke, coal tar pitch	Materials group 3 ( $m a t e r i a l 3$ )
Alumina, primary unwrought aluminum (rest of world)	Materials group 4 ( $m a t e r i a l 4$ )

Source: Compiled by the USITC.

II.D.1.b(1) Scope 3 Emissions for Aluminum Materials Group 1: U.S. Primary Unwrought Aluminum from Surveyed Facilities

Some primary unwrought aluminum covered in the investigation was produced by U.S. aluminum smelters and then consumed by different U.S. facilities in the production of other covered aluminum products. If a facility indicated that it sourced primary unwrought aluminum that was smelted in the United States, the questionnaire asked which of the six U.S. smelters were suppliers and the quantity of material received from that smelter ( $R e c e i p t s_{a l u m i n u m, s u p p l i e r})$ , used as activity data. The relevant emissions intensity from the supplying smelter was then used as the scope 3 emissions factor ( $E F_{a l u m i n u m, s u p p l i e r})$ for that quantity of primary unwrought aluminum in the receiving facility in equation E.53.

$\begin{matrix} S 3_{a l u m i n u m, s u p p l i e r} = R e c e i p t s_{a l u m i n u m, s u p p l i e r} * E F_{a l u m i n u m, s u p p l i e r} (E .53) \end{matrix}$

II.D.1.b(2) Scope 3 Emissions for Aluminum Materials Group 2: Secondary and Wrought Product Inputs from U.S. Sources

Just as with primary unwrought aluminum inputs, survey respondents who indicated that they sourced secondary unwrought aluminum inputs from the United States were asked to select the specific facilities they sourced from and the quantity sourced from each facility ( $R e c e i p t s_{m a t e r i a l 2, u s}$ ). Some of these facilities both supplied and sourced secondary unwrought aluminum to and from various other U.S. facilities, making it difficult to trace the original supplier and apply an appropriate emissions factor. Facilities were also less likely to be able to specifically identify the source facility for these inputs than they were for primary aluminum. For these reasons, a supplying-facility-specific emissions factor approach was not used for secondary unwrought aluminum inputs.

Instead, the questionnaire data were used to generate a national estimate for scope 3 emissions from secondary unwrought aluminum inputs before they are used as inputs into other secondary unwrought aluminum. To do this, domestic secondary unwrought aluminum inputs were removed from the calculation at the national level. Thus, the national estimate for the “input” or “first-use” secondary unwrought aluminum trends slightly lower than the overall secondary unwrought aluminum estimate. Because the same circularity issue appears for wrought aluminum producers also using other wrought products as inputs, the same approach of calculating an emissions factor for wrought aluminum inputs using a national estimate rather than a supplying-facility-specific estimate was applied.

These national input estimates were then used as the scope 3 emissions factor ( $E F_{m a t e r i a l 2, u s}$ ) for all relevant inputs in equation E.54.

$\begin{matrix} S 3_{m a t e r i a l 2, u s} = R e c e i p t s_{m a t e r i a l 2, u s} * E F_{m a t e r i a l 2, u s} (E .54) \end{matrix}$

II.D.1.b(3) Scope 3 Emissions for Aluminum Materials Group 3: Materials Without Expected Source-Specific Emissions Factors

For materials in this group $—$ alloys, purchased carbon anodes, calcined petroleum coke, and coal tar pitch $—$ no regional-specific emissions factor was used in this investigation, and no sourcing information was collected. The Commission did not consider the benefit of greater source specificity for these materials to justify the greater burden on facilities associated with providing that detailed information.558F[555] Calcined petroleum coke and coal tar pitch, used in anode production, were assigned the same universal values that IAI uses in their 2022 Scope 3 Calculation Tool.559F[556] The quantities of material used ( $U s e_{m a t e r i a l 3}$ ) were collected in the questionnaire based on the assumption that these materials were never produced on-site. Therefore, total receipts are calculated based on the sum of the facilities’ various quantities of consumption of that material rather than an explicit “external receipts” variable. These are multiplied by the IAI default emissions factors to generate scope 3 emissions in equation E.55.

$S 3_{m a t e r i a l 3} = U s e_{m a t e r i a l 3} * D e f a u l t E F_{m a t e r i a l 3, g l o b a l} (E .55)$

Box E.4 Special Treatment of Alloys in Aluminum Emissions Calculation

The combined weight of alloying materials typically make up 1 $-$ 15 percent of the weight of aluminum products.^a In North America, the percentage weight of alloy content in aluminum is low. Therefore, the Commission assigned a primary aluminum emissions factor to the inclusion of all alloying materials. This method avoided undercounting the emissions burden from the inclusion of these alloying materials, as well as reduced burden on companies that consume a relatively negligible amount of this material and may not be able to separate their alloy use by material type.^b

^aAA, The Environmental Footprint of Semi-Fabricated Aluminum Products in North America: A LifeCycle Assessment Report, January 2022, 46.

^bThe Aluminum Association used this methodology of assigning a primary aluminum emissions factor to alloys in its 2022 report on The Environmental Footprint of Semifinished Aluminum Products in North America. The EU’s Guidance Document for CBAM Implementation also suggests this methodology. EC, DG-TAXUD, CBAM Guidance for Installations, December 8, 2023, 60.

II.D.1.b(4) Scope 3 Emissions for Aluminum Materials Group 4: Materials With Potential Source-Specific Emissions Factors

For materials in this group $—$ alumina and primary aluminum (or primary aluminum metal content) from a country other than the United States $—$ it was assumed that external receipts ( $R e c e i p t s_{m a t e r i a l 4, r e g i o n}$ ) could be sourced from multiple countries and that regional- or country-specific emissions factors might be used. Therefore, country source information was collected for facilities’ receipts of these materials. Regional- or country-specific default emissions factors were then used where possible, or if a more specific default factor was not available, a global default factor was used ( $D e f a u l t E F_{m a t e r i a l, r e g i o n}$ ), as shown in equation E.56.

$S 3_{m a t e r i a l 4} = (\sum_{r e g i o n} R e c e i p t s_{m a t e r i a l 4, r e g i o n}) * D e f a u l t E F_{m a t e r i a l 4, r e g i o n} (E .56)$

II.D.2. Selection of Default Emissions Factors

Each of the calculations of scope 3 emissions described above relied upon the use of emissions factors, particularly default country-specific or global emissions factors. This section provides greater detail on how emissions factors were selected for use in those calculations, including the criteria considered for selection, a full description of the approaches used to select emissions factors for use in calculating scope 3 emissions of facilities producing covered aluminum products, and an introduction to the approach taken for selecting emissions factors for use in steel product calculations (described in greater detail in appendix F, “Development of Default Emissions Factors for Materials Used by Steel Facilities”).

Default emissions factors are meant to capture the emissions intensity of products across an industry and therefore are inherently subject to uncertainty. A consuming facility’s suppliers may have production practices that are less or more emissions intensive than those represented within default emissions factors, which would cause calculated scope 3 emissions to be overstated or understated, respectively. To improve the accuracy of scope 3 emissions results, the Commission selected default emissions factors based on the following criteria:

· Representativeness: Default emissions factors were selected based on whether they were representative of the emissions intensity of activity data collected in the questionnaires. In particular, default emissions factors were selected if they covered a material description that matched as closely as possible to that used in this investigation. The Commission selected default emissions factors that were recently published or corresponded to a recent time period in order to represent 2022 activity data. For certain emissions-intensive materials including pig iron, steel products, and primary unwrought aluminum, default emissions factors were selected that corresponded to the countries and production practices for which activity data were collected.560F[557]

· Consistency with overall calculation approach: To the extent possible, default emissions factors were selected that were developed using approaches that were as consistent as possible with the broader methodology used in this investigation. In particular, the Commission sought to use or develop default emissions factors that included direct and indirect emissions corresponding with all processes (or at least the most emissions-intensive processes) covered within the investigation’s system boundaries. In addition, the Commission sought default emissions factors that included all GHG emissions covered in this investigation, including not only CO₂ but also CH₄, N₂O, and PFCs.

· Reputation and widespread use of source: Where possible, the Commission sought to use publications or databases with default emissions factors that were internationally recognized or widely used by other publications or by industry sources.

· Transparency: Where possible, default emissions factors were sought that were either based on well-documented methods or where the emissions factors themselves were publishable, or both.

· Consistency across emissions factors: For any given material, the Commission sought to use the same source of default emissions factors across countries.

For materials in the steel system boundary, the Commission selected emissions factors from an approach referred to in this report as the partial life cycle inventory (LCI) approach. The partial LCI approach used methods adapted from a study by the European Commission’s Joint Research Centre (JRC) to construct country- and production pathway-specific emissions factors for all steel product categories and pig iron. This was supplemented by publicly available emissions factors covering global industries for upstream materials used in iron and steel production. The partial LCI approach is described in appendix F (“Development of Default Emissions Factors for Materials Used by Steel Facilities”).

For materials in the aluminum system boundary, emissions factors from public sources were used, and these factors can be found in table G.2 of appendix G. The available list of public regional primary aluminum scope 3 emissions factors that match closely to the methodology of the aluminum calculations is not long.561F[558] The Commission uses data from a 2022 IAI report that released primary aluminum lifecycle inventory data to be used in modules for life cycle assessments.562F[559] The IAI report also demonstrated the use of this data with several examples of regional life cycle assessments for primary aluminum.563F[560] Of the public regional primary aluminum factors available, these example data most closely match the Commission’s system boundaries, including the same production processes for primary aluminum. While not a perfect match, because the IAI data include emissions such as low-voltage anode effects and transportation emissions, it captures the important emissions variation in primary unwrought aluminum smelted in Canada from the global average. Since this small set of data includes this important factor, as well as a global factor, a similar system boundary to the Commission’s investigation, and is unlikely to understate emissions, the Commission uses this set of factors to apply to primary unwrought aluminum smelted internationally.

For downstream aluminum products in the United States, most of the variation captured by regional scope 3 factors depends on whether imported primary aluminum was sourced from Canada, where the emissions factor of 5.4 mt CO₂e/mt aluminum is much lower than the 2019 global average of 16.8.564F[561] Because this situation had a public emissions factor, the aluminum calculations did not require regional emissions factors created using various sources of underlying data in the same way that the steel calculations did.

II.D.3. Allocation of Scope 3 Emissions to Unit Processes

As described in the overview section at the beginning of this appendix, the Commission allocated all facility-level emissions to subprocesses (using process subdivision) and ultimately to unit processes (using physical allocation where necessary). This section describes how the Commission allocated scope 3 emissions to unit processes (i.e., how $S 3 U G H G_{p r o d u c t}$ was calculated).

II.D.3.a Process Subdivision of Scope 3 Emissions to Subprocesses

Process subdivision in this investigation involved the division of facility-level emissions into “subprocesses”, or predefined broad process categories that make one or more reference products. For some materials that only had one potential use by facilities producing covered products, the Commission allocated facility-level scope 3 emissions ( $S 3_{m a t e r i a l}$ ) fully to a single subprocess ( $s u b p r o c$ ) without any additional process subdivision calculations (i.e., $S 3_{m a t e r i a l} = S 3_{m a t e r i a l, s u b p r o c}$ ).565F[562] All other materials were potentially usable in multiple subprocesses. For each of these other materials ( $m a t e r i a l$ ), the Commission calculated subprocess-level scope 3 emissions ( $S 3_{m a t e r i a l, s u b p r o c}$ ) by multiplying $S 3_{m a t e r i a l}$ by the material’s use in each subprocess ( $U s e_{m a t e r i a l, s u b p r o c}$ ) as a share of total use ( $U s e_{m a t e r i a l}$ ) (equation E.57). This share is referred to as the subprocess’s “material use share.”

$\begin{matrix} S 3_{m a t e r i a l, s u b p r o c} = S 3_{m a t e r i a l} * \frac{U s e_{m a t e r i a l, s u b p r o c}}{U s e_{m a t e r i a l}} (E .57) \end{matrix}$

The Commission’s questionnaire collected material use data either covering material from external sources only or total material use. For some steel and aluminum materials, however, two sets of material use data were collected.566F[563]

1. The first set of material use data covers use of externally sourced material that is further processed into another form of the same product category (e.g., hot-rolled flat steel used to make a pickled hot-rolled flat steel product).

2. The second set covers use of that material from all sources (including external receipt and on-site production) to make other product categories (e.g., hot-rolled flat steel used to make cold-rolled flat steel).

If only one of these use datasets was reported by a facility, the Commission used equation E.57 based on that dataset alone. However, some facilities reported data under both sets when they further processed externally sourced material into another form of the same product category and then used that further processed product to make a downstream product. Where this was the case, the Commission allocated $S 3_{m a t e r i a l}$ to the subprocess corresponding to the same product category (e.g., scope 3 emissions associated with receipts of hot-rolled flat steel were allocated to the subprocess covering the production or further processing of hot-rolled flat steel). If the quantity of material receipts exceeded the quantity from the first material use dataset described above, the Commission allocated scope 3 emissions associated with the difference of these two values using material use share data from the second dataset.

II.D.3.b Further Allocation of Subprocess-Level Scope 3 Emissions to Unit Processes

$S 3_{m a t e r i a l, s u b p r o c}$ was equivalent to material-specific unit process scope 3 emissions ( $S 3 U G H G_{m a t e r i a l, p r o d u c t}$ ) corresponding with a single reference product ( $p r o d u c t$ ) where either of the following was true:

· The subprocess only corresponded with a single reference product (see table E.1 in the “I. Overview of Product-Level Emissions Intensity and Inventory Calculations” section of this appendix for a listing of subprocesses where this was the case); or

· The material was a steel product. In this case, the material itself was either stainless steel or carbon and alloy steel. If the Commission allocated scope 3 emissions associated with a stainless steel material to a steel production subprocess using equation E.57, it assumed that the material was used in production of the stainless version of that steel product. For example, scope 3 emissions receipts associated with stainless semifinished steel used in hot rolling flat steel products were assumed to be used in the production of stainless hot-rolled flat steel products, specifically. The same logic applied for carbon and alloy steel.

For all other material-subprocess combinations where scope 3 emissions associated with non-steel materials were allocated to subprocesses corresponding with multiple potential reference products, $S 3_{m a t e r i a l, s u b p r o c}$ was allocated to $S 3 U G H G_{m a t e r i a l, p r o d u c t}$ using the physical allocation approach shown in equation E.58.

$\begin{matrix} S 3 U G H G_{m a t e r i a l, p r o d u c t} = S 3_{m a t e r i a l, s u b p r o c} * \frac{O u t p u t_{p r o d u c t}}{O u t p u t_{s u b p r o c}} (E .58) \end{matrix}$

Once all material-specific scope 3 emissions were allocated to unit process level emissions, they were aggregated across materials to calculate $S 3 U G H G_{p r o d u c t}$ (equation E.59).

$\begin{matrix} S 3 U G H G_{p r o d u c t} = \sum_{m a t e r i a l} S 3 U G H G_{m a t e r i a l, p r o d u c t} (E .59) \end{matrix}$

[544] The sections below describe the materials for which the Commission always based its scope 3 emissions calculations on material use data instead of external receipts for calculating scope 3 emissions. Beyond those systematic incorporations of material use data into the scope 3 analysis, there were also isolated cases for individual facilities where the Commission decided during curing of the data that external receipt data were missing or incomplete and would be better replaced by material use data. In some cases, facilities that had significant buildups or drawdowns of externally sourced material inventories in 2022 adjusted the reported external receipts to better reflect actual use of those materials in order to avoid substantial overstatement or understatement of scope 3 emissions related to their production using those materials in that year.

[545] Chapter 3 (“Calculating Facility-Level Scope 3 Emissions”) includes a description of the multi-source and global approaches to calculating facility-level scope 3 emissions.

[546] Iron sinter is also included in material group 1; however, no facilities reported receipts of iron sinter in 2022.

[547] The Commission collected country-specific material receipts for iron pellets, DRI, and carbon electrodes in order to allow for a multisource approach to calculating scope 3 emissions for these materials. Although the Commission did not collect country-specific material receipts for the other materials in material group 1, a review of U.S. import data and information provided by an industry representative allowed for an assumption that most of these materials were sourced domestically in 2022. USITC DataWeb/Census, HTS statistical reporting numbers 2704.00.00.25, 2518.20.0000, 2522.10.0000, accessed September 27, 2023; U.S. industry representatives, email messages to USITC staff, October 10, 2023. However, the Commission did not locate country-specific emissions factors for any materials in the steel system boundary that were reliable or could be consistently applied across the various country sources for these materials. Although the Commission took steps to calculate country- and production-pathway emissions factors for pig iron and steel products (material groups 3 and 4) due to their substantial contribution to scope 3 emissions, it did not undertake such a detailed analysis for these other materials and instead relied on global emissions factors and a global approach to calculating scope 3 emissions for material groups 1 and 2. Appendix F (“Step 1 Emissions Factors Collected from Public Sources”) has more information about how global emissions factors were selected for upstream material other than pig iron and steel products.

[548] U.S. industry representatives, email messages to USITC staff, October 6 and 10, 2023; USITC, hearing transcript, December 7, 2023, 153 $-$ 55, 167 (testimony of Jeff Becker, U. S. Steel); SSINA, written submission to the USITC, December 21, 2023, 3 $-$ 4; AISI, written submission to the USITC, December 21, 2023, 4 $-$ 5; U. S. Steel, written submission to the USITC, December 21, 2023, app. 1.

[549] As discussed in chapter 3 (“Allocation of Facility-Level Emissions to Unit Processes”) and in the section below (“Computing Product-Level Emissions Inventories”), material use data are also collected for product allocation purposes.

[550] The Commission included measures of scope 3 emissions even for facilities’ reported use of ferroalloys, other alloying metals, and coating metals that were not provided as selectable options in the questionnaire. Facilities reported quantities of material use for other forms of chromium, nickel, molybdenum, and coating, cladding, and plating metal. The Commission selected emissions factors that corresponded with textual descriptions provided by the facilities to accompany their reported use of these metals. These emissions factors are not reported since they are specific to individual facilities’ responses; however, the Commission selected these from the same sources used to develop default emissions factors reported in table G.4 of appendix G.

[551] The Commission selected the source countries identified in the questionnaire based on a review of 2022 U.S. import data. USITC DataWeb/Census, HTS heading 7201, accessed September 27, 2023. Facilities responding to the questionnaire identified their U.S. pig iron suppliers using a list developed by the Commission of steel producers based on GHGRP reports and a database published by AIST. AIST, 2022 Directory of Iron and Steel Plants, 2022; EPA, “GHGRP, Envirofacts GHG Query Builder,” accessed September 18, 2024. Facilities were also given the opportunity to identify U.S. pig iron suppliers other than those pre-populated in the questionnaire.

[552] Facilities responding to the questionnaire identified their U.S. pig iron suppliers using a list developed by the Commission of pig iron suppliers based on GHGRP reports, a database published by the Association for Iron and Steel Technology (AIST), and information from industry representatives. AIST, 2022 Directory of Iron and Steel Plants, 2022; EPA, “GHGRP, Envirofacts GHG Query Builder,” accessed September 18, 2024; U. S. Steel, written submission to the USITC, December 21, 2023, app. 3; CPTI, written submission to the USITC, November 21, 2023, app. 1. Facilities were also given the opportunity to identify U.S. steel suppliers other than those pre-populated in the questionnaire.

[553] A country of melt and pour for steel is the location where the raw steel is: (1) first produced in a steelmaking furnace in a liquid state; and (2) poured into its first solid shape. The first solid state can take the form of either a semifinished steel product (i.e. ingot, bloom, slab, billet, beam blank, etc.) or a finished steel mill product. The location of melt and pour is customarily identified on mill test certificates that are commonplace in steel production. Countries of melt and pour identified in the questionnaire were selected for each steel product based on a review of 2022 U.S. import data from the Steel Import Monitoring and Analysis System’s Melt and Pour Dashboard. USDOC, ITA, “Melt and Pour Dashboard,” accessed November 8, 2024.

[554] The Commission calculated $D e f a u l t E F_{s t e e l, c o u n t r y}$ using the partial LCI approach described in appendix F (“Development of Default Emissions Factors for Materials Used by Steel Facilities”).

[555] Alloying metals are assigned a primary unwrought aluminum emissions factor, rather than an emissions factor for the specific alloying material. As alloying elements typically have a lower emissions burden compared to that of primary aluminum, this method avoided undercounting the emissions burden from the inclusion of these alloying materials, as well as reduced the burden on facilities that consume a relatively negligible amount of this material and may not be able to allocate their alloy use by material type. AA, The Environmental Footprint of Semi-Fabricated Aluminum Products in North America: A LifeCycle Assessment Report, January 2022, 46.

[556] Sphera Solutions, IAI Scope 3 Calculation Tool Guidance, September 13, 2022, 32. While (green) petroleum coke can differ in emissions intensity depending on inputs and processes used, once it is further refined into calcined petroleum coke little information on its emissions intensity is published. Coal tar pitch similarly has an emissions factor value from the IAI Scope 3 guidance and little else to consider as regional alternatives.

[557] Some secondary sources with default emissions factors publish factors that are systematically higher than industry average emissions intensity estimates in order to discourage reporting facilities from using default emissions factors in lieu of actual primary source information regarding scope 3 emissions. For example, ResponsibleSteel uses this approach and refers to this as the “burden of the doubt” approach to selecting default emissions factors. Likewise, the European Commission intends to use default emissions factors for goods subject to CBAM that “will be set at the average emission intensity for each exporting country, increased by a proportionately designed mark-up.” ResponsibleSteel, ResponsibleSteel International Production Standard: Version 2.1, May 21, 2024, 115; EC, DG-TAXUD, “Default Values for the CBAM Transitional Period,” December 22, 2023, 5. By contrast, the purpose of the Commission’s investigation was to calculate the average and highest emissions of steel products made in the United States as accurately as possible, not to encourage any kind of reporting technique. Therefore, default emissions factors were selected that were as representative as possible of typical or average emission intensities in a given industry. the Commission adjusted default emissions factors from ResponsibleSteel to remove the mark-up as described in greater detail in appendix F (“Step 1 Emissions Factors Collected from Public Sources”).

[558] The “Statistics” section of the IAI website includes primary aluminum smelting intensity and power consumption by region, but not life cycle inventories for these regions that include all three scopes. Many regional estimates only include scopes 1 and 2. Others use different fuel mix assumptions. IAI, “Primary Aluminium Smelting Energy Intensity (2022),” September 21, 2024; European Aluminium Association, Environmental Profile Report, February 2018, 46; AA, The Environmental Footprint of Semi-Fabricated Aluminum Products in North America: A LifeCycle Assessment Report, January 2022, 108; Vidovic et al., GHG Emission Intensities of the Steel, Fertilisers, Aluminium and Cement Industries, 2023, 162.

[559] IAI, Life Cycle Inventory Data and Environmental Metrics for the Primary Aluminium Industry, November 2022, 23.

[560] IAI, Life Cycle Inventory Data and Environmental Metrics for the Primary Aluminium Industry, November 2022, 37.

[561] See appendix G, table G.2 for a list of these emissions factors.

[562] In the steel system boundary, scope 3 emissions associated with facilities’ receipts of ferroalloys and other alloying metals as well as carbon electrodes were fully allocated to the steelmaking subprocess. In the aluminum system boundary, all scope 3 emissions were allocated to either primary or secondary unwrought aluminum production for facilities that only make those products. In addition, all alloys were allocated to secondary unwrought aluminum production for facilities that produce both secondary unwrought aluminum and wrought aluminum products.

[563] These materials include secondary unwrought aluminum and both stainless and carbon and alloy forms of semifinished steel, hot-rolled flat steel, cold-rolled flat steel, and hot-worked long steel.