Google’s data centres have caused a lot of debate in Finland, and with good reason. People worry about whether there will be enough green electricity, about how few jobs the data centres create and about their environmental impacts. Less than a month ago, Google was caught illegally clearing forest in Muhos. The company cut down an area of forest the size of 420 football pitches to make way for a data centre without an environmental impact assessment.
The concerns about data centres are therefore justified. Just Shift also keeps an eye on data centre projects, especially their consumption of steel and cement. Last month it was reported that Google aims to reduce the emissions from building its data centres by sourcing green steel from Swedish low-emission steel producer Stegra. This is a step in the right direction, but there are a few things worth noting.
What on earth are book and claim and EACs?
Google uses a book and claim approach to source low-emission steel. This means that Google does not actually receive any low-emission steel from Stegra. Instead, it buys environmental certificates that are created when Stegra produces low-emission steel. Wait, what?
First, let’s imagine that Stegra’s low-emission steel plant in Boden, Sweden, starts up in the coming years (which is still somewhat uncertain due to financing challenges). At the plant, Stegra would produce low-emission steel using hydrogen-based direct reduction of iron and electric arc furnaces. In other words, the plant would make genuine, near-zero-emission steel.
Stegra’s Ola Hansén spoke about the importance of lead markets at a Just Shift webinar in June.
However, it doesn’t always make sense to transport steel over long distances, and the plant does not produce all the steel grades that customers (such as Google’s data centres) need. That is why Stegra has decided to decouple the low-emission attribute from the steel it produces. In other words, Google buys environmental certificates from Stegra, known as EACs (Environmental Attribute Certificates), which carry the low-emission attribute of Stegra’s steel. In turn, Stegra sells the same amount of its low-emission steel as conventional, emission-intensive steel.
Offtake agreements are key to the future of green steel
So Google buys certificates from Stegra and completely conventional, high-emission steel from another company. With the environmental certificates, Google reduces the emissions of the steel it buys in its emissions accounting. Stegra gets money it badly needs to build its production plant, and Google gets its construction emissions down. Everybody wins, right?
Admittedly, the system is attractive, and Stegra has been commendably careful in designing its environmental certificates. Offtake agreements like this play an important role in scaling up low-emission steel production in the future. However, if poorly implemented, accounting-based methods such as book and claim can open the door to greenwashing, so they need to be handled with care.
Just Shift is running a project that explores which green claims about steel truly speed up the transition to low-emission steel production and which, at worst, slow it down. So stay tuned!