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Money in the air and "foxtails" of Evraz Group

Money in the air and "foxtails" of Evraz Group

22.09.2010 — Analysis

Red plumes of smoke that are called "foxtails" or red smoke rising from factory stacks are an integral part of the Nizhny Tagil landscape. The authorities of the Sverdlovsk Region demanded that Nizhny Tagil Iron & Steel Works (Evraz Group) should halve levels of air pollution by 2020. The metallurgical executives claim that they have reduced hazardous emissions by a third over the last four years and that is the best they could do. However, as the RusBusinessNews columnist has found it out, the content of hazardous substances in the city air is increasing. Therefore, there is an opportunity that the factory can sell quotas within the framework of the Kyoto Protocol, thus, offsetting its losses in penalties for excess fume emissions. 

Nizhny Tagil Iron & Steel Works (NTMK) is one of the largest air polluting factories in the Sverdlovsk Region. During the Soviet period, it poured into the air about 660 thousand tons of harmful fumes each year. By 2009, according to Angelina Savina, head of the Environmental Department of the Nizhny Tagil Administration, emissions went down to 102 thousand tons. The factory executives believe that the improvement is much more impressive: according to Sergei Permyakov, head of the NTMK Environmental Protection Department, at present emission levels remain at 65.8 thousand tons. The decrease was partially achieved through shutdown of two blast furnaces, two coke-oven batteries and an open-heart plant. In 2009 the factory also renovated the converter operating facilities, banding wheel shop and repaired gas treatment plants, having spent more than 1 billion rubles on environmental measures. Then NTMK was able to take advantage of its quotas for carbon dioxide emissions within the framework of the Kyoto Protocol.

The arrangement known as the "joint implementation project" was initiated by the Russia government that endeavors to get factories involved in deployment of energy-efficient technologies. The companies that through their own budget decrease hazardous emissions receive a certain amount of quotas as a bonus, which they can sell on the international market. The managers say that the NTMK project was submitted to the Savings Bank of the Russian Federation (the quota administrator), with included the Nizhny Tagil factory in the register of sellers. NTMK expects that it will be able to earn 20 million euro on the quota sales.

Before the company has got hold of "air earnings", the Commission for Ecology and Environmental Management at the Government of the Sverdlovsk Region examined and discussed the environmental policy of this company controlled by Evraz Group. The discussion brought to light quite an interesting paradox: the management of the iron and steel factory that accounts for 60% of air pollution in Nizhny Tagil states that the factory has decreased emissions by one third since 2005, whereas meteorologists point at deterioration of the ecological situation against 2008. How come there are less emissions of hazardous fumes, but the quality of air has not been improving in the second largest city in the Sverdlovsk Region within the last years?

Alexander Eremin, First Deputy Minister of the Natural Resources in the Sverdlovsk Region, points out that the similar situation is observed in Pervouralsk and Revda - the home-towns for large-scale ferrous and non-ferrous smelting facilities. Statistical data assert that emission levels go down, whereas instrumental monitoring indicates growing air pollution. There is an amazing diversity of the offered suggestions: transition of hazardous substances from other areas, interaction of pollutants and resulting generation of new emissions. The Deputy Minister does not deny possible manipulations with numbers on the part of executives.

Angelina Savina suggests that the intention of the factory management to reduce emissions should not be discouraged, though the ecological situation in Nizhny Tagil has undoubtedly become worse as compared with 2008. She gives as a guess that meteorologists based their report about the situation in the city, using one-time measurement of the maximum concentration of hazardous substances in the air in the vicinity of the metallurgical factory, rather than at all the stations simultaneously.

Nadezhda Shilina, acting director of Uralgidromet, does not agree with such accusations: "In Nizhny Tagil we have four stations where we take measurements at scheduled time. We do not monitor specific enterprises; our job is to check air pollution levels. Based on our data, the Ministry for Natural Resources prepares annual government reports about the condition of environment".

The last report that was issued in 2008 placed Nizhny Tagil among the TOP-30 most polluted cities in Russia. The air is polluted mostly by benzapyrenes and nitrogen oxides. Expert-chemists say that these substances are mostly typical of automobile exhausts and metallurgical factories. The Nizhny Tagil administration states that transport accounts for 23% of emissions according to their calculations; therefore it is obvious that the lion's share of pollution accounts for the metallurgical factories.

Sergei Afanasiev, Deputy Head of the Rosprirodnadzor Department in Sverdlovsk Region, in his interview to RusBusinessNews confirmed that the Nizhny Tagil Iron & Steel Works has excessive emissions of hazardous substances and pays penalties for this. In the near future, according to him, the situation is unlikely to change: the factory was built many years ago, being one of the oldest factories in the Ural, and it takes long to change technology. Besides, Russian science is in a very difficult position, and the problem of emissions post-processing is frequently left unsolved.

On the other hand, Russian metallurgical companies do not seem to worry much how to detoxify hazardous fumes. They can offset losses incurred due to penalties for excessive emissions through selling quotas under the Kyoto Protocol. The most peculiar fact is that they even do not have to reduce carbon dioxide emissions. Vladimir Slivyak, Co-Chairman of the Ekozaschita International Environmental Group and an official observer at the Climate Summit in Copenhagen, told the business news agency that the Kyoto Protocol based its standards on the emission level for 1990. Since that time, the industrial production output has considerable decreased in Russia, which had a relevant impact on carbon dioxide emissions. Therefore, in order to meet the quotas, companies do not have to take any actions - factory stacks are fuming much less than in the Soviet time. And that is a good opportunity to make money.

The established arrangement is unlikely to change in the near future: the economic crisis and severe competition prevent NTMK from reaching the level of output that could at least be equal to that of 2008. The government is not ready to initiate technological progress by using a legislative "whip". So, the citizens of Nizhny Tagil have to put up with the "foxtails" of Evraz Group.

Vladimir Terletsky

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