The letter denounces the push for so-called “mass balance” accounting schemes primarily advocated by Japanese industry actors, which allow steelmakers to assign emissions reductions from one part of their operations to unrelated steel products. This could enable high-emitting coal-based steel to be sold as if it were low-emissions, or even zero emissions, and even get access to a green premium. 

Civil society organisations are raising the alarm as critical decisions are being made within major international standard-setting processes. Proposals to legitimise this so-called “mass balance” accounting are currently under consideration in ongoing revisions to global climate and product standards. The Science-Based Targets Initiative (SBTi) last week closed a public consultation covering Scope 3 emissions. This week, several signatories are replying to a World Steel Association consultation on its Chain of Custody Guidelines. The signatories are calling for clear safeguards to ensure that these frameworks do not allow misleading low emissions claims to pass as credible product-level decarbonisation.

According to the letter, schemes promoted by the Japan Iron and Steel Federation (JISF) and Nippon Steel¹ would pool limited greenhouse gas (GHG) reductions from across a company’s operations and allocate them arbitrarily to selected steel products, regardless of their actual embodied emissions². Emissions ‘cuts’ would be assessed based on a hypothetical baseline and would not require any physical connection to the steel products sold. This practice could enable high-emitting, coal-based steel to be sold with claims of low or zero emissions. 

The signatories argue that the debate over emissions accounting is far from a neutral technical exercise. Rather, it reflects deeper power dynamics, as some industry actors attempt to reshape international rules in ways that obscure emissions and stall meaningful progress. By redefining how carbon is counted, these proposals introduce loopholes that allow companies to claim climate benefits without changing their underlying production methods.

The letter emphasises that 90% of emissions in the steel sector originate from coal-based production, and decarbonising the ironmaking stage is critical. Some producers are now investing in transformative technologies, including green hydrogen-based direct reduced iron (H2-DRI), expected to be commercial in the late 2020s. However, these first movers face higher costs and risks. To reward their efforts and ensure a level playing field, civil society organisations call for robust market mechanisms such as green premiums, that clearly distinguish this genuinely low-emissions steel from greenwashed steel.

If product accounting frameworks such as Product Carbon Footprints (PCFs) or Environmental Product Declarations (EPDs) were to be altered in a way that would attribute different emissions levels to two products which are physically identical and have gone through the exact same production processes, it would create a false equivalence between coal-based steel and genuinely low-emissions products. Buyers could be left without any means to confirm a product’s actual carbon footprint. This would not only mislead buyers and financiers, but also undermine the credibility of climate-related standards, enable greenwashing, and devalue investments in real decarbonisation.

The organisations call on institutions such as the Science-Based Targets Initiative (SBTi), Greenhouse Gas Protocol, International Standards Organization (ISO), and the World Steel Association to reject fake low-emissions steel from inclusion in pending revisions to their standards and hold firm against efforts to equate pooled emissions reductions with physical product data in lifecycle assessments.

The signatories conclude by urging steel buyers not to support these misleading accounting schemes, but to align procurement with producers implementing near-zero compatible technologies and physically traceable low-emissions supply chains.

Quotes from signatories:

Caroline Ashley, Executive Director for SteelWatch:
“What’s being proposed isn’t a legitimate accounting method, it’s greenwashing, plain and simple. Powerful organisations are cooking the books by changing how carbon is counted, building loopholes to delay real change. If regulators allow high-emissions coal-based steel to be sold as green steel just because some virtual savings are recorded on paper, they will undermine their own climate targets and discredit the markets they are trying to shape. Steel buyers, policymakers and standard-setters must draw a clear line: near-zero emissions steel must be earned, not claimed.”

Heather Lee, Green Steel Lead for Solutions For Our Climate:
“POSCO’s low-carbon product line, Greenate, is no longer actively promoted following a greenwashing complaint and guidance about environmental claims from the Ministry of Environment. Greenate lacks clear and transparent standards for measuring actual carbon emissions. Instead, it relies on avoided emissions reductions calculated through a mass balance methodology. This methodology allows companies to potentially overstate their climate contributions without achieving real, physical emission reductions. Steelmakers should not be allowed to market and sell so-called ‘low-carbon steel’ while continuing to operate coal-fired blast furnaces without a concrete phase-out plan.”

Matthew Groch, Senior Director for Heavy Industry for Mighty Earth: 

“Companies like automakers buying fake low-emission steel are looking for an easy excuse to appear green without cutting real emissions. They cannot claim that this actually reduces the pollution emitted to make their products. Truth in advertising would sound more like: ‘This steel was made with coal by a company that has also undertaken unrelated emissions reduction projects.’ Anything else is greenwashing.”

List of signatories of the letter (listed in alphabetical order):

1. Action Speaks Louder
2. African Resources Watch International / African Resources Watch (AfreWatch)
3. BankTrack
4. Beyond Fossil Fuels
5. BigWave
6. Centre for Environmental Rights
7. Eko forum Zenica
8. Environmental Coalition on Standards (ECOS)
9. Fair Steel Coalition
10. Fundación Ecología y Desarrollo (ECODES)
11. Germanwatch
12. Global Efficiency Intelligence
13. Green Advocates International
14. Greenpeace Japan
15. Industrious Labs
16. Instituto Políticas Alternativas para o Cone Sul- PACS
17. Just Shift
18. KFEM Chungnam
19. KlimaNexus 
20. Lead the Charge Network
21. Mighty Earth
22. People of Asia for Climate Solutions
23. Public Citizen
24. Sandbag Climate Campaign
25. Solutions for Our Climate (SFOC)
26. SteelWatch
27. The Sunrise Project
28. Transition Asia
29. urgewald
30. Vaal Environmental Justice Alliance (VEJA)

Notes

1. JISF Green Steel Guidelines https://www.jisf.or.jp/business/ondanka/kouken/greensteel and https://www.nipponsteel.com/en/product/nscarbolex/neutral/
2. For example, Nippon Steel’s NSCarbolex Neutral product: the 47,145 tCO2e estimated to be saved between October 2022 and March 2023 from the replacement of a scrap-fed, modified basic oxygen furnace with an electric arc furnace at Nippon Steel’s Hirohata plant can be, based on Nippon Steel’s methodology, attributed to steel produced at any of the company’s other plants, including coal-based, high-emissions BF-BOF plants https://www.nipponsteel.com/product/nscarbolex/neutral/assurance_statement_en.pdf

This item was originally posted on SteelWatch's website here.