we are one - posco · we are one 2 0 0 9 carbon report posco’s first carbon report since...

2 2009 CARBON RepORt

We are One2009 CARBON RepORt

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The rapid advance of global warminghas forced the polar bear

to scramble for floating ice in order to survive.

This is the point where we begin. By saving the earth from

climate change, we save ourselves.

The polar bear and humanity share the same plight. Nature and people are bound together as one.

We are One

2 0 0 9 CARBON REPORT

POSCO’S FiRST CARBON REPORTSince POSCO’s first annual Environmental Report was released in 1995, we have regularly disclosed information on our corporate environmental efforts. Starting in 2003, our Environmental Report has been integrated into our Sustainability Report. Actions by the company to mitigate climate change were first recorded in the 1999 Environmental Report, and coverage of this topic has continued. A materiality assessment of the POSCO Sustainability Report in 2009 revealed that climate change is a matter of great public concern and a major impact on business. Therefore, the decision was made to publish a Carbon Report to detail what POSCO is doing to address the climate change issue.

PROFESSiONAl REviEw & ThiRd-PARTy vERiFiCATiON OF dATAThe data and other contents in the 2009 Carbon Report were reviewed by experts from POSCO and from the Center for Green Growth Research at the POSCO Research Institute. Moreover, Samil PricewaterhouseCoopers, an independent external organization, provided assurance on the contents of this report and on the amount of GHG emissions at the steelworks, thereby enhancing the integrity of the data.

REPORTiNg FRAmEwORkThe 2009 Carbon Report was compiled according to the G3 Guidelines of the Global Reporting Initiative (GRI). The financial data contained herein were determined on the basis of Korea’s corporate accounting standards. The amounts of GHG emissions at the steelworks in Pohang and Gwangyang were measured using The POSCO GHG Accounting Guidelines, which was developed after referring to the IPCC Guidelines for National Greenhouse Gas Inventories, WBCSD/WRI Greenhouse Gas Protocol and World Steel Association Guidelines.

COvERAgE PERiOd The 2009 Carbon Report covers the period between January 1 and December 31, 2009. The Report also includes 2008 figures to measure Scope 3 (indirect) GHG emissions and the GHG reduction effect in society through the use of energy-efficient steels.

REPORT SCOPE The 2009 Carbon Report details the climate change response programs and their respective results at the Pohang Works, Gwangyang Works, Pohang Head Office, and Seoul Office. Coverage has also been extended to activities by domestic members of the POSCO Family (i.e, POSCO Group affiliates as well as other POSCO-invested companies and institutions ) for mitigating climate change.

REPORT diSTRiBuTiON ANd FEEdBACkThis Report has been published in Korean and English language versions, and it can be downloaded from the POSCO Website (http://www.posco.com). Stakeholders are invited to send their feedback by mail, email or telephone.

Indices, plans, and other details in this report may be revised without prior notice according to changing circumstances. This is a translation of the Korean language version. In the event of a dispute over wording, the Korean text applies. The financial statements in the report are expressed in Korean Won (₩). Solely for the convenience of the reader, these financial statements may be translated into US dollars at the rate of ₩1,159.00 to US$1.00 as of December 31, 2009.

2009 CARBON REPORTWe at POSCO recognize the impact that climate change is having on the world and have been aggressive in fulfilling our corporate responsibilities regarding the environment. Our 2009 Carbon Report contains information on POSCO’s carbon management framework, and activities for greenhouse gas (GHG) emissions reduction. The contents were developed based on an analysis of climate change issues of interest to stakeholders. This Report is meant to both inform you and serve as a reliable reference for your decision making.

REPORT FEATuRES


Contents

RepoRt summaRy C2

Ceo's message 04

exeCutive summaRy 06

intRoDuCtion

08 Introduction

10 Carbon Risk & Opportunity Management

1 1 Governance

12 Vision & Target

13 Performance

gReen steel

15 Carbon Management System

16 Energy Efficiency Improvement

18 CO2 Breakthrough Technology Development

gReen Business

21 Energy Efficient Steel

22 Eco-friendly Slag Cement

Carbon Market

24 Renewable Energy

gReen life

27 With the Community

29 At the Workplace

gReen paRtneRship

31 World Steel Association Climate Action Asia-Pacific Partnership on Climate Change

Green Energy Partnership

32 Ocean Climate Change Partnership

Carbon Communication

33 Independent Assurance Report

34 GRI / SAM DJSI / CDP Index

36 Contact, Reader Feedback / Questionnaire

2009 CARBON RepORt CeO's MessAge

Our determined efforts to reduce GHG emissionsunderscore our desire to advance with your trust and support.

to our stakeholders

POSCO was established in 1968, when Korea still had a third-world economy. Our stated goal was to "serve the nation through steelmaking." We are now in our fifth decade and have faithfully fulfilled our mission through exceptional competitiveness over the years. This has been accomplished by achieving one of the world's largest crude steel output capacities, constantly upgrading production technology and creating added-value products.

Our potential truly shined in 2009, a time of global economic crisis, but our current position is no guarantee of POSCO's future. I have called on our people to confront the new challenges we face by readopting the resolve we had at the time of our founding.

The BRIC economies, led by China, are growing fast, signaling the advent of a "second steel age." At the same time, the global steelmaking industry has witnessed mega-mergers, consolidation and resource nationalism in recent years. The steel market has become a venue for international trade competition, requiring players to be very strong to succeed.

Meanwhile, the issue of "greenness" has emerged at the heart of the rapidly changing business environment. Low-carbon green growth is a new business paradigm at the national level, emphasizing the need to integrate environmental concerns with economic growth. This has major implications for industries as well. In November 2009, the Korean government announced its national GHG reduction targets through 2020, building a consensus on the significance and direction of low-carbon green growth for the nation as a whole. This announcement indicates that Korea intends to join the global environmental effort arising from the Climate Summit in Copenhagen. The climate change issue poses both risks and opportunities for steelmakers, who work in the most energy-intensive industry of all. A major weakness is the industry's reliance on burning coal to reduce iron ore. On the other hand, steel is essential for building wind turbines and other infrastructure for green growth, and that is a strong point for us. Therefore, the fastest way for POSCO to secure future competitiveness is to switch over to carbon-lean steel processes and be first to take advantage of green business opportunities.

Based on this conviction, I have stressed to my people the importance of three management principles: Open Management, Creative Management, Eco-friendly Management. More specifically, I am promoting the following agenda:

First, we will bolster our involvement in green steel. We will further improve the energy efficiency level of our steel industry, which is already the world’s highest. This includes further evolving our environment-friendly FINEX technology as well as developing breakthrough low-carbon and hydrogen steel making technology.

Second, we consider green businesses to be new growth engines for POSCO. Our development of energy efficient steel products will provide us with a competitive advantage in the market for value-added steel. We will bring together the competencies of all POSCO Family members to develop smart grids, next-generation fuel cells and other areas of the new and renewable energy sector.

Third, everyone at POSCO is being encouraged to adopt "greener" lifestyles, and we will continue to expand our POSCO Carbon Neutral Program, which supports activities to lower GHG emissions in society at large.

Finally, we recognize the importance of green partnerships, and are involved in efforts inside and outside Korea to protect the earth's environment. One program of note is the Asia-Pacific Partnership on Climate Change.

People are facing the problem of climate change, and the urgency is even greater when we consider the ever-greater burden that will be passed on to future generations. Therefore, global countermeasures must be devised and then quickly and pro-actively implemented by everyone together.

Trust is the key to a rapid collective response to climate change. POSCO has become the first steelmaker to issue a Carbon Report with third-party verification and has announced voluntary GHG reduction targets. I hope that our willingness and efforts to act will inspire greater trust from you, the stakeholders, in going forward with us. Please join with POSCO in helping to protect the global environment and elevate the competitiveness of steel at the same time.

CEOJoon-Yang Chung

February 2010


the CaRBon RepoRt DeButs.

We believe this 2009 Carbon Report is the first ever in the global steel industry to be issued with third-party verification. The document informs stakeholders that management is aware of the climate change issue and explains what POSCO is doing to address this challenge.

the gReen gRowth Committee is launCheD.

The Green Growth Committee was formed to bring together the skills and competencies of the POSCO Family and is now debating climate change policy, carbon-lean steel technology and green growth strategies for all affiliates in the POSCO Group. The Committee is divided into four subcommittees (Carbon-lean Steel Technology, Climate Change Response, Renewable Energy and New Green Growth Engines), and POSCO Family companies and institutions are also participating in the discussions.

posCo announCes a voluntaRy gReenhouse gas ReDuCtion taRget.

The goal is to reduce lowered CO2 emissions generated in the production of each ton of crude steel by nine percent by 2020 compared to the average CO2 intensity recorded during the past three years (2007-09). Investment will be made in additional energy recovery facilities and carbon-lean steel processes.

an investment of w 1.4 tRillion has RaiseD eneRgy effiCienCy oveR the past DeCaDe.

Between 1999 and 2008, POSCO continued to improve energy efficiency by investing heavily in new coke dry quenchers and top gas recovery turbines. At the same time, research has been focused on breakthrough technology development for further lowering CO2 emissions via the environment-friendlier FINEX process, capturing the CO2 from byproduct gases of iron-making, and via advances into hydrogen steelmaking

soCiety's oveRall ghg emissions aRe Being loweReD By inCReasing the supply of eneRgy-effiCient steel.

Energy-efficient steel products are helping society to reduce its overall carbon footprint while raising the competitiveness of related industries. The availability of high tensile steel sheet for automobile bodies is estimated to reduce overall CO2 emissions in society by 260,000 tons per year, while high-grade electrical steel is estimated to lower the overall CO2 emissions in society by another 1.69 million tons annually.

posCo is helping to Raise puBliC awaReness anD enCouRage puBliC paRtiCipation in the fight against Climate Change.

The POSCO Carbon Neutral Forum is heightening awareness and encouraging people to actively adopt greener lifestyles. Currently ten different projects are underway, targeting schools, social groups, NGOs, housewives and other sectors of society.

posCo takes paRt in the asia-paCifiC steel task foRCe.

POSCO is participating in various cooperative projects, including CO2 mitigation and energy-saving technology deployment among participants from seven nations (Korea, the US, China, Japan, India, Australia, and Canada). The company is also leading projects to study GHG reduction potential and setting voluntary reduction schemes

EXECUTIVESUMMARy

P.o.S.C.o

JulY 7, 2009

2020

green Steel

green BuSineSS

green life

green PartnerShiP

6

IntroductIon

to hanD Down natuRe unspoileD to suCCeeDing geneRations

Iron and steel have been intimately linked to the advancement and wellbeing of humanity, making possible everything from tricycles for children to automobiles for families. POSCO today is doing more thansupply the steel that makes life better and more convenient. We are also taking the steps necessary to ensure that future generations can enjoy a beautiful and unspoiled natural environment. Our goal is to help build a cleaner world in which nature, people, and steel blend harmoniously.

8 2009 CARBON RepORt 8 INtROdutION

INTRODUCTION POSCO was established in 1968 and currently operates two integrated steelworks in Korea, one at Pohang and the other at Gwangyang. In 2009, the company earned more than w3.14 trillion in operating income on sales of more than w26.95 trillion. Crude steel output reached 29.53 million tons for the year. The company is preparing for a major growth surge with the aim of achieving w100 trillion in annual sales by 2018. To this end, additional integrated steelworks will be built outside Korea and the business portfolio will be expanded to include renewable energy, ferronickel magnesium, and other materials.

Carbon dioxide (C02) accounts for the majority of the greenhouse gases emitted by the steelmaking industry. This CO2 is generated from coal, which is loaded into the blast furnaces either directly or indirectly. Coal is used inside the blast furnaces to reduce iron ore, and replacing it with another raw material for this purpose would be difficult. The CO2 generated during the reduction reactions in the iron making process represents the vast majority (over 90%) of the CO2 emissions in the entire steelmaking operation. Meanwhile, the steel thus produced is essential for many different industries, including shipbuilding, automobile manufacture, construction, civil engineering and consumer electronics.

Business impact

public attention

7 R&D program

2 Business performance

3 Environmental management

5 Corporate governance

6 Emissions

8 Recycling

1 Climate change

Corporate social responsibility 4

100

90

80

70

60

50

40

30

20

10

0 10 20 30 40 50 60 70 80 90 100

High importanceAverage importanceLow importance

2009 Events to Address the Climate Change Issue

- POSCO Workshops on Practical Responses to Climate Change (Seoul, March 10; Gwangyang, March 12; Pohang, March 13)- POSCO-POSTECH-RIST Joint Forum on Nuclear Hydrogen Production & Hydrogen Steelmaking (Pohang, May 8)- POSCO Family Forum on Renewable Energy (Pohang, June 22)- 1st Meeting of POSCO Family Green Growth Committee (Seoul, July 7)- Launching Ceremony for 1st POSCO Carbon Neutral Program (Seoul, September 28)

- 2nd Meeting of POSCO Family Green Growth Committee (Seoul, December 17)

Awards & Qualifications

- Inclusion on Sustainable Asset Management Dow Jones Sustainability Index for 5th straight year (2005-09)- 2009 Korea National Environment Management Award- Top 50 on 2006 CDP Climate Leadership Index- Outstanding Enterprise for Climate Change Response, awarded by Korea CDP Committee for 2nd straight year (2008-09)

steel process Chart

posCo oveRview

steelmaking pRoCesses

calcination

coal

iron ore

limestone

coke

sintering plant

blast furnace

hot rolling mill

cold rolling mill

converter(BOF) continuous caster

Iron ore and coke are placed at the top of the blast furnace. Huge quantities of hot (1200℃) is blasted into the bottom of the furnace, and liquid iron collects at the bottom after the reduction reaction is carried out.

The molten iron produced in the blast furnace contains many impurities, including carbon, phosphorus and sulfur. These are removed by blowing high-purity oxygen through the molten metal.

Once the impurities have been removed, the molten metal is conveyed to the continuous casters, which turn it into intermediate products such as slabs, blooms or billets.

The slabs, blooms, billets and other intermediates pass through a series of rollers, which flatten them. The rolling processes are classified as either hot or cold, depending on the intended use of the final product.

iRon making steelmaking Casting Rolling

the primary process that produces liquid iron

producing steel sheet or wire

solidifying the liquid metal

refining the liquid iron to produce steel

Underscoring the impact that climate change now has on business and the public's great concern over this issue, POSCO has in 2009 implemented its materiality test to analyze issues of common interest to its stakeholders regarding sustainable management. POSCO has maintained a dialog on climate change through its annual Sustainability Report as well as regular public announcements and press briefings. From this year, our stakeholders can enjoy still greater access to information through the new Carbon Report. Climate change is rapidly emerging as a major global issue, and countries as well as companies must act boldly and quickly to make the transition to a low-carbon economy. The urgency of the situation is particularly felt by steelmakers, who are engaged in such an energy-intensive industry. In short, they must change how they operate.

POSCO management concurs that companies play a role in climate change. We also recognize that the paradigm shift to low-carbon green growth poses both risks as well as opportunities for our business. Measures to help mitigate climate change represent a key aspect of the POSCO management strategy. We are building a company-wide system for addressing the climate change issue. Objective measures are being carried out to assess the risks and opportunities and then take the appropriate action. Compulsory climate change policies and schemes that bind companies to significant reductions in GHG emissions may put steelmakers without adequate countermeasures in place at risk of spiraling costs and weakened competitiveness.

However, POSCO will be ready with solutions. In the short term, we are raising the energy efficiency of our production processes, while over the mid-/long term we are developing breakthrough technologies to reduce GHG emissions. Meanwhile, diverse business opportunities will arise as the low-carbon economy advances. We approach these opportunities as ways for the steel industry to generate new revenue streams.

2009 Sustainable Management Materiality Assessment Matrix


10

CARBON RISK ANDOPPORTUNITy MANAGEMENT

organization of Response to Climate Change

Representatives from POSCO affiliates as well as invested companies jointly participate in the POSCO Family Green Growth Committee, which was launched on July 7, 2009. The Committee is chaired by the POSCO CEO. The Committee consists of four Subcommittees, which are respectively tasked with policy, technology, renewable energy and new business. Regular meetings are to be held at least twice a year to discuss climate change policy, carbon-lean steelmaking, and strategies for promoting green growth at POSCO affiliates. The second Committee meeting convened on December 17 to review and finalize the POSCO Family Green Growth Master Plan. In addition, a cooperative network has been established among POSCO, RIST (Energy & Environment Research Center, CO2 Research Group) and POSRI (Center for Green Growth Study) to research technologies for reducing GHG emissions and studying related government policies.

GOVERNANCE

2009 CARBON RepORt

Risk

OppORtunities

sThe possibility of increased flooding, rising sea levels and more severe droughts could adversely affect the outdoor storage of raw materials, make industrial process water more difficult to obtain and drive up related costs.

sHeavy reliance on coal is a basic part of steel production. Therefore, finding a substitute will be difficult when coal prices rise.

sThe company faces a cost burden and the risk of weakened competitiveness when implementing voluntary GHG reduction targets and complying with tighter regulations on carbon emissions.

bEnactment of the government’s tougher carbon restrictions will impair the competitiveness of energy-intensive industries (such as steel), which in turn could reduce people’s incomes and curtail steel output.

s•pWhen the government initially applies its restrictive carbon policy, POSCO faces a risk of legal noncompliance as parts of the internal carbon control program may still be incomplete and the employees concerned may lack sufficient training.

bDemand for carbon-lean steel is likely to increase in the consumer electronics, automobile, shipbuilding and construction sectors. -Transport Sector, Automotive: The growing importance of fuel efficiency will create the need for lighter vehicles,

which will drive demand for specialty steel. -Power Sector: Demand will rise for special grades of electrical steel that are essential for the production of new and renewable energy. -Renewable Energy: Steel products will be needed to make wind-powered turbines and fuel cells.

bDemand for steel products is likely to rise because steel is easy to recycle. bBeing first to develop certain new technologies such as hydrogen steelmaking and carbon capture and storage can bolster corporate competitiveness.

l•pHeightened shareholder awareness from positive assessments of corporate response to climate change can help boost the image of an environment-friendly brand.

posCo’s Carbon management Risk and opportunity factors

s Green Steel B Green Business l Green Life p Green Partnership

posCo Carbon Risk & opportunity management system

Discover the opportunity factors related to climate change and assess global trends

- Carbon market: CDM carbon projects, GHG registries- Green business: innovative technologies for lowering CO2 emissions, renewable energy

OppOrtunity identificatiOn

Determine the risk factors related to climate change

- Pinpoint physical and legal risk factors- Assess risk levels and financial implications

risk identificatiOn

CaRbOn ManageMent systeM

Build a ghg management system

•Installation of the POSCO Carbon Management System ('06)•Build and manage a CO2 inventory (a third party verification of CO2 emissions) •Assess the effects of new businesses and processes on CO2 emissions

CaRbOn ManageMent systeM

promote climate change response programs

•Manage risks related to climate change in each operational sector, pursue new green businesses - (Four Subcommittees): Carbon-lean Steel Technology, Climate Change Response, Renewable Energy, New Growth Business - (Research Organizations): Center for Green Growth Study at POSRI , CO2 Research Center at POSTECH, Energy & Environment Research Center at RIST, CO2 Research Group

CheCk and Reviewexamine climate change response activities

•Periodically assess the status of GHG reduction efforts in each sector•Examine the status of response to government regulations and policies regarding climate change •Examine the status of new green businesses POSCO-wide

COMMuniCatiOnReports to top management / green growth Committee

•POSCO Family Green Growth Committee Report (each half)•Bureau of Green Growth acts as “control tower”•Subcommittee activity reports and discussion (each quarter)

The committee members include senior officials from POSCO-invested companies and institutions (POSCO E&C, POSCO Power, POSCO ITC, POSCO plantEC, POSCO Specialty Steel, POSTECH, RIST and POSRI)

Function: Discuss and implement major agenda items in their respective fields of responsibility, present new agenda items to the Green Growth CommitteeMeeting frequency: at least twice a year

Carbon-lean Steel Technology Subcommittee

Climate Change Response Subcommittee

Renewable Energy Subcommittee

New Green Growth Business Subcommittee

Chairman: CEOFunction: Deliberate on major items on agenda for green growth, discuss and revise issues undertaken by subcommittees

SUBCOMMITTEES (FOUR)

BUREAU OF GREEN GROWTH

POSCO FAMILy GREEN GROWTH COMMITTEE

INtROdutION

POSCO is addressing the climate change issue with a company-wide system that is based on a management philosophy that makes the environment a top priority. Management realizes that ongoing effort in innovative green technologies is necessary to make low-carbon green growth possible. The Research Institute of Science and Technology (RIST), the Pohang University of Science & Technology (POSTECH), and researchers at POSCO are leading this effort through joint projects. In addition, a program conducted in close cooperation with the POSCO Research Institute (POSRI) is identifying and analyzing the latest global discussion and response trends on climate change as well as the risk and opportunity factors involved in climate change management. The results of this research are regularly reported to the POSCO Family Green Growth Committee, which is chaired by the POSCO CEO.

POSCO's climate change response program seeks to minimize the risks from managing climate change as well as to maximize the opportunities available. The focus is on strengthening corporate competitiveness even as the world advances into the era of low-carbon green growth.

To this end, POSCO has adopted a systematic and dynamic approach to risk and opportunity factors associated with climate change. The process begins by identifying the factors (Plan), then taking corrective steps (Do), assessing the results (Check) and adopting the appropriate follow-up measures (Act). The Carbon Report, verified by a third party, helps the company maintain open communication with stakeholders. Moreover, the results of this process are fundamental for elevating internal competencies, advancing into new business areas, and supporting decision-making by top management.

POSCO is using the carbon management system to respond proactively to the business risks and opportunities brought by climate change and global warming. Discussions are now underway on global Post-Kyoto schemes, which are scheduled to go into effect in 2012. Meanwhile, the Korean government announced, in November 2009, its own GHG reduction target for the mid-term (by 2020) and will enact a Basic Law on Low-carbon Green Growth. All of these developments will directly affect the domestic steel industry. POSCO has already determined the following business risks and opportunities that are associated with climate change and global warming:

12 2009 CARBON RepORt 2009 CARBON RepORt 12

POSCO recognizes that the low-carbon green growth paradigm is a key factor in the conduct of business. Thus, the company is committed to participating in global environmental effort as well as contributing to achieving the national aim for GHG reduction. A POSCO Family strategic carbon management program is being implemented to realize the vision of being a global leader in green growth. Program initiatives include transitioning to carbon-lean steel processes, increasing the supply of energy efficient steel products, and advancing into new green growth business areas. A POSCO GHG reduction target has been set for 2020, and the Carbon Report, verified by a reputable third party, has been published. These activities and programs are cultivating greater trust among stakeholders inside as well as outside the organization, and helping POSCO to secure leadership in the response to global climate change.

VISION & TARGET

posCo's voluntaRy ReDuCtion taRget By 2020

Plans for low-carbon green growth were finalized at a December 2009 meeting of the POSCO Family Green Growth Committee, and the details were made public in February 2010. Over the past three years (2007-09), the average CO2 intensity was 2.18 tons of carbon dioxide (t-CO2) per ton of crude steel (t-S) produced. The plan now calls for this CO2 intensity figure to be lowered by 9 percent to 1.98 t-CO2/t-S by 2020. To this end, the company will invest w1.5 trillion by 2020 to reduce the amount of coal used as raw meterial in steel production, improve energy efficiency, and develop CO2 breakthrough technologies.

Meanwhile, POSCO will contribute to reduce approximately 6 million tons of overall CO2 reduction a year in society by producing energy efficient steel products and turning byproducts from steelmaking into usable resources between now and 2020 by. For example, high-strength steel will reduce vehicular weight, thereby improving fuel efficiency; higher grades of electrical steel sheet will increase the energy efficiency of electric motors and transformers; and greater quantities of blast furnace slag will be used in the production of cement.

Also by 2020, the POSCO Family will invest a combined w5.5 trillion in new green growth businesses that will help lower annual CO2 emissions by 8 million tons a year compared to current levels. Experience gained in the construction of the Taegisan Wind Farm will be applied to advance into the onshore and offshore wind power generation business. Investment will be expanded to develop and localize third-generation fuel cells, devise smart grid business for energy-intensive industrial facilities such as steelworks, and create new ways to convert solid waste into energy.

PERFORMANCE

•POSCOreferredtotheIPCCGuidelinesforNationalGreenhouseGas Inventories, WBCSD/WRI Greenhouse Gas Protocol and World Steel Association Guidelines to devise the POSCO GHG Accounting Guidelines for calculating GHG emissions as befits the steel industry.

- Setting organizational boundaries for measurement: Pohang Works and Gwangyang Works - Scope 1: The CO2 emissions from vehicles on the steelworks sites

are negligible and therefore not included. - Scope 2: Refers to indirect CO2 emissions from the consumption of

purchased electricity

•Thefigureofemissionsmayvarydependingonthefuturechangein carbon emission factors and boundary conditions. Also CO2 emission can be changed by the possession of coke plants, and reutilization of byproduct gases.

ghg emissions fRom steelmaking pRoCesses

Almost all of the greenhouse gases generated at the Pohang and Gwangyang Works is carbon dioxide. The total amount of CO2 emissions from both steelworks was 63.2 million tons in 2009, down from the 72.8 million tons recorded the year before. The drop was due to a lower production of crude steel because of the falling demand for steel in the wake of the global economic slowdown as well as to POSCO's efforts to improve energy efficiency. Carbon dioxide intensity was 2.2 t-CO2/t-S in 2008 and 2.14 t-CO2/t-S in 2009, a reduction of 2.7 percent.

Scope 1

•Theterm"high-strengthsteelsheetforautomobiles"referstohigh-strengthsteel(HSS),whichhasatenacityof590MPaorhigher,aswellas to advanced high-strength steel (AHSS), which has a tenacity of at least 440 MPA and offers outstanding processability. The fuel-saving effect of using this steel sheet has been quantified by calculating the reduction in the body weight of a passenger car (displacement of 2,000cc) produced by a certain Korean automaker.

•"High-gradeelectricalsteelsheet"referstograin-orientedelectricalsteelsheetwithacorelossof0.98W/kgorloweraswellastonon-oriented electrical steel sheet with a core loss of 4.7W/kg or lower. The improvement in energy efficiency has been estimated in using these products to make electric motors and transformers.

•ThestandardsappliedherewereexaminedbytheAsia-PacificPartnershipSteelTaskForce.Thecalculationsshowthatsubstitutingonetonof blast furnace slag for a ton of clinker will reduce CO2 emission in cement production by 0.79 tons.

ghg ReDuCtion fRom eneRgy effiCient steel & BypRoDuCt usage

"Energy efficient steel" means high grade steel that improves the energy efficiency of the products used in automobiles, electric motors, transformers and other productions. In addition to supplying these products, POSCO is using blast furnace slag as an environment-friendly ingredient for cement, helping to lower CO2 emissions in society generally.

CO2 reduction in society (thousands of t-CO2/yr) 262 1,693 5,638

Sales volume (thousands of tons) 328 295 7,137

Delete High-strength steel sheet for automobiles (2008)

High-grade electrical steel sheet (2008)

Blast furnace slag forcement (2009)

ghg Reduction effect in society

otheR ghg emissions

The CO2 generated while transporting iron ore, coal and limestone—all raw materials needed in steel production—to the steelworks as well as those emissions from employees' commuting to and from work and taking business trips inside and outside Korea are as follows:

•CalculatedbyreferencingtheWBCSD/WRIGreenhouseGasProtocol

•Thetotalweightofthepurchasedcoalwas27.83milliontons,whichisreflectedinthecalculationof"otherCO2 emissions."

•Thetotalnumberofemployeesstandsat16,707asoftheendof2008.

other Co2 emissions, 2008

Scope 3 824,545 6,460 2,506

Delete Transport of purchased raw materials

Employee commuting Business travel

(Unit: t-CO2)

2.5

2.0

1.5

1.0

0.5

02006 2007 2008 2009

2.13

0.06

2.07

2.19

2.12

0.07

2.14

2.05

0.09

2.20

2.13

0.07

100

80

60

40

20

02007

44

2009

116

2008

109

CO2 R&D Expenditure

(Unit: hundreds of billions of won)

Scope 2

posCo's target for Reducing Co2 intensity(unit: t-CO2/t-S)

2.18

1.98

2007~2009 2020

:Reductionwithcurrently availabletechnologies

:Reductionwithbreakthrough futuretechnologies

(Unit: t-CO2/t-S)

INtROdutION

14 2009 CARBON RepORt 15

CARBON MANAGEMENT SySTEM

POSCO has referred to the IPCC* Guidelines for National Greenhouse Gas Inventories, WBCSD**/WRI*** Greenhouse Gas Protocol, and World Steel Association Guidelines to develop the POSCO GHG Accounting Guidelines. These in-house rules serve as the framework for the GHG Management System, which has been in operation since 2006. The organization for overseeing GHG emissions extends to the Pohang and Gwangyang Works as well as office buildings at Pohang and Gwang yang , research facilities, and HRD Center. Statistics on the consumption of raw materials and fuels that contain carbon, purchase of electricity, and sales volumes of steel products and byproducts are the basis for calculating CO2 emissions resulting from production processes. Emission volumes are also measured for non-production activities such as employees commuting to and from work, business travel, and the import and transport of fuel and raw materials.The company-wide project for reducing CO2 emissions was selected as one of POSCO's 100 priority tasks for 2009. CO2 intensity, CO2 emissions per ton of crude steel produced, is now a key performance index for senior management. In addition, the GHG Management System serves as a platform for internally assessing the effects of new business areas and processes on GHG emissions. For example, the CO2 intensity, CO2 generated per ton of hot metal, in the conventional blast furnace process is compared with that in the FINEX process. The effects on CO2 intensity have also been measured when replacing pulverized coal in conventional blast furnaces with LNG or byproduct gases, and when producing synthetic natural gas. Ongoing advancements in the GHG Management System will also make it an essential platform for managing internal GHG emissions and deciding expenditures for new businesses and treating CO2 emissions from production processes.

* IPCC: Intergovernmental Panel on Climate Change** WBCSD: World Business Council for Sustainable Development*** WRI: World Resources Institute

inventory management Phase1

project management Phase2 strategy managementPhase

3

Carbon Management System

Kick-off ceremony for POSCO Family Environment Management CommitteeBriefing on project to establish GHG inventories

Greensteel

Starting in 2010, meanwhile, POSCO will support major invested companies in creating their own GHG inventories. These inventories will, in turn, be used to measure GHG emissions for the POSCO Family as a whole and to provide a basis for achieving reduction targets.

innovative, gReen teChnologies aRe Being DevelopeD in joint pRojeCts among the CoRpoRate, aCaDemiC anD ReseaRCh Communities, helping to wRite a new ChapteR in steel histoRy.

Steel has helped to make the world stronger and richer for people, and we at POSCO believe that ways must now be found to bring steel production in tune with nature as well. POSCO commercialized FINEX technology, marking a paradigm shift in the world steel industry. CO2 emissions are being reduced by FINEX, which can break through the perceived limits of an industry that consumes massive amounts of energy.


01 | inverter for high-voltage motors

POSCO has applied innovative technology that was previously restricted to small-capacity pump motors because of the limited capacity of electric parts and insulation issues, to heavy-duty, high-voltage motors. This innovation has lowered energy consumption. In addition, a newly developed control system allows for motor operation with minimal energy consumption. The new control system delivers power individually to each motor depending on its output, reflecting the specific requirements of each mill. Making this breakthrough possible was the development of analysis and control technologies (patents pending) that can precisely monitor changing operational conditions and actual load. As a result, w2.7 billion in energy expenditure was saved.

02 | energy saving in electrical Room lighting

POSCO has adopted a new method of conserving energy when lighting electrical rooms in its mills. Besides cutting down on the actual lighting, an intelligent system has been installed to turn the lights on only when needed. Considering various conditions, researchers analyzed working hours and developed a method for detecting the presence of workers. As a result, an automatic on-and-off controller is able to cut unnecessary energy expenditures by 92 percent. Furthermore, efficiency-enhancing lighting technologies will steadily be adopted, including highly reflective lampshades as well as electrode-less, LED and plasma lamps.

gReeN steel

ENERGy EFFICIENCyIMPROVEMENT

enhanCeD eneRgy effiCienCy

Byproduct gas recovered from the iron and steel making processes provides most of the energy required for steelmaking processes and surplus byproduct gas is used for in-house power generation. For example, 69 percent of the electricity consumed by the Head Office building, as well as the Pohang and Gwangyang Works in 2009 was supplied by the byproduct gas power plant, energy recovery facilities (CDQ and TRT), and LNG-fired combined cycle plant. The remaining 31 percent was outsourced.

eneRgy saving aCtivities

POSCO concluded a voluntary two-phase agreement with the Korean government to reduce energy use between 1999 and 2008. Some 2,100 projects were conducted over the ten-year period, lowering energy consumption by 2.91 million tons of oil equivalents (TOEs). These projects included FINEX combined cycle power generation, improvements to boilers, and the installation of CDQ facilities. Importantly, w1.43 trillion was spent to install energy recovery facilities. Moreover, a new Integrated Energy Information System allowed the company to devise mid-/long-term plans, check on performance, and share new ideas on ways to reduce energy use. Energy saving activities were devised after diagnosing energy consumption and holding workshops within individual divisions, and these activities resulted in a saving of w195.6 billion in energy expenditures for 2009 alone.

03 | stack heat Recovery system

Recovering medium/low-temperature (under 300℃) heat from power plant stacks and from reheating and heat treatment furnaces was long considered to be difficult. However, a recently developed stack heat recovery system will be deployed at the Pohang Works in 2010.

04 | Coke Dry Quenching facilities

The red hot coke used to melt and reduce iron ore is a heat source with temperatures ranging between 950 and 1100℃. A coke dry quencher is used to recover this heat and generate power. The system currently covers 97 percent of all iron and steel making processes.

05 | smart grid

The smart grid is an advanced electricity transmission and distribution network that utilizes digital information and control technolog y to maximize energ y efficiency through interactive, real-time communication between the provider and consumers. POSCO has the optimal conditions for implementing the smart grid because each steelworks has its own instrumentation, network, receiving and distribution system, power plants and alternative energy sources. In 2010, an oxygen plant at the Gwangyang Works will launch a pilot smart grid project. The experience gained from operating the advanced network will enable POSCO to enter a smart grid network customized for energy-intensive industries.

06 | District heating with waste heat from steelworks

POSCO is the first company in Korea that offers local district heating services that use waste heat generated on the worksite. In 2001, a 15km pipeline connecting the Pohang Works with the Hyoja-Jigok residential area was completed, providing heating to local houses, community facilities and research & education institutions such as POSTECH.

CDQ facilityHigh-efficiency motor with inverter

eneRgy Consumption in 2009

The amount of energy consumed in 2009 is estimated by source as follows:

Coal Heavy Oil LNG Electricity

20 MT 1.3 Ml 648 MNm3 6,066MWh


98%may. 2008

gReeN steel

teChnology foR CaptuRe of Co2

fRom steelmaking off-gas

POSCO is currently working on a process that uses ammonia to absorb CO 2 and separate it from the off-gas generated during steelmaking processes. Low-temperature steam produced at the steelworks serves as the energy needed to reclaim the CO2, making possible a highly efficient way to separate carbon dioxide. An R&D project for this new technology was launched in 2005, and a pilot project (capacity of 50 Nm3/hr) was begun in December 2008. Work on technology for demo-plant (capacity of 1,000 Nm3/hr) is scheduled to start in 2010.

Facility for absorbing and separating CO2 from flue gas

FIneXdemo FIneX1.5Mt

finex: CaRBon-lean steelmaking

In 2007, POSCO commercialized the FINEX process, a next-generation technology that can replace conventional iron-making methods. Because FINEX does not require the sintering and coke making processes, which form iron ore fines and soft coal into certain shapes, pollutants from the two processes are reduced. Thus, the new technology can significantly lower raw material processing costs and investments in pollution prevention facilities. FINEX emits only 19 percent of the SOx, 10 percent of the NOx and 52 percent of the dust emitted from conventional state-of-the-art blast furnaces* equipped with desulfurizers, denitrifiers and dust collectors. In addition, the high efficiency of FINEX reduces coal consumption. As of May 2008, the CO2 intensity of POSCO's FINEX process (1.5 million tons annually) is three percent lower than the world average in producing hot metal.** FINEX uses oxygen rather than hot air, thereby maintaining low nitrogen content in the waste gas. In addition, a CO2 sequestration system is integrated into the process, facilitating the future adoption of carbon capture and storage (CCS) technology. POSCO will continuously increase the energy efficiency of this process and has set a technical roadmap for lowering CO2 intensity, first to seven percent below the world average, and then reaching ten percent below. Once CCS is available, the target could reach as much as 45 percent below what a conventional blast furnace can achieve.

Roadmap for Co2 emissions Reduction using finex

Schematic Diagram of Finex

CO2 BREAKTHROUGH TECHNOLOGy DEVELOPMENT

Comparison of pollutant emissions

sox100%

dust

100%nox

100%

10%

19%

52%

Performance: 1.82 t-CO2/t-hot metal

1st target : 1.75 t-CO2/t-hot metal, heat recovery and use

2nd target : 1.70 t-CO2 /t-hot metal, innovative energy recovery

3rd target : 1.04 t-CO2 /t-hot metal, CCS

130%

106%DeC. 2006

93% 90%

55%

97%

Carbon-lean iron & steel making technology

1stRoute

CO2 capture and sequestration technology

2ndRoute

Hydrogen steelmaking

3rdRoute

technology Roadmap

Blast Furnace FINEX

calcination

•Assumingtheworldaverageof1.88t-CO2/t-hot metal as 100 percent

*Including blast furnace and pre-processing (sintering, coking, calcining) facilities**Comparison with the estimated CO2 emissions from blast furnace processes of nine Asian and European steelmakers

sintering plant coke

hyDRogen steelmaking

Very-high-temperature reactors (VHTRs), next generation reactors, with lower environmental impact and hydrogen from high-temperature thermal chemistry and high-temperature electrolysis are all seen as innovative future technologies to minimize CO2 emissions for energy-intensive production processes. POSCO is currently developing hydrogen steelmaking technology that can take advantage of hydrogen that is mass-produced without any significant carbon footprint.

sinteReD oRe heat ReCoveRy

Currently the heat emitted from red-hot (550�) sintered ore in the sintering plant is used to produce steam and hot water. However, the heat is exchanged in an open cooler, providing a heat recovery rate of just 17 percent. In 2007 POSCO began work on a sealed heat exchanger that will be

able to increase the recovery rate from sintered ore to at least 70 percent.

slag heat ReCoveRy

High-temperature (at least 1,300�) slag is a byproduct of iron and steel making and is either cooled with water or air. (Water-cooled slag can be used as an ingredient in cement.) In 2008, POSCO embarked on a project to develop technology for pelletizing melted slag and recovering heat during the air cooling process.

Hydrogen Steelmaking Process with VHTR (by 2050)

Hydrogen from water splitting

H2

holder

HydrogenFINEX fluidized

reactor

Electricity generation

Iron ore fines

Heating

Reduced ironHigh-capacity converter

Power supply

Fe2O3+3H2=2Fe+3H2O

Hot charge

Reactor

20 2009 CARBON RepORt 21

POSCO is innovating technologies to reduce CO2 emissions and promote “low-carbon, green growth.” The company is also engaged in various activities aimed at lowering GHG emissions throughout society. These include the supply of energy-saving materials such as lighter and stronger steel sheet for automobiles and the use of byproducts from steelmaking in the production of cement.

ENERGy-EFFICIENCy STEEL

high-gRaDe eleCtRiCal steel plate

Electrical steel plate is used in generators, power transformers and electric motors. Electrical steel can be classified into two main types: grain-oriented and non-oriented. High-grade electrical steel plate has a higher orientation in the rolling direction than other grades do. It features low iron loss and high magnetic flux density, which will increase the energy efficiencies of the transformers, motors and other products in which it is used.

pos eCo housing: a soCial enteRpRise

The construction of POS Eco Housing, a social enterprise, began in December 2009 and will be finished in April 2010. This social enterprise will build steel-framed houses according to an eco-friendly method developed by POSCO and will carry out support projects that depend on similar techniques. The main activity is the construction of steel houses, which use light, galvanized girders for the frame, and which are fully recyclable, earthquake resistant, and highly durable. The structures are well insulated, therefore requiring less energy for heating and cooling. In addition, POS Eco Housing will build structures for the POSCO Group; low-rise office buildings for the local community; and classrooms, community centers and other public facilities.

* Based on the “average annual mileage data of passenger vehicles,” published by Korea Transportation Safety Authority (2006)

GreenbusIness

automotive high-stRength steel sheet

When applied to automobiles, high-strength steel sheet can be made thinner than mild-grade sheet can, reducing the overall curb weight without compromising strength. Lightweight vehicles are more fuel efficient, which lowers their GHG emissions as well. Assuming a vehicle made of high-strength steel sheet travels 19,000km* a year (in Korea), one ton of high-strength steel will lower the CO2

emissions by eight tons over ten years.

ouR eCo-fRienDly steel pRoDuCts Can Be founD in automoBiles that offeR people a Convenient way to get aRounD anDin poweR plants that light the woRlD.

We are committed to cutting GHG emissions in society and laying the foundation for “green growth” by reducing energy consumption. POSCO is developing various innovative technologies for “low-carbon, green growth,” including automotive high-strength steel that lightens vehicles for improved fuel efficiency and lowered CO2 emissions.

Co2 emissions reduction from the use of automotive high-strength steel

Delete 2008

CO2 reduction throughout the product lifecycle 2,624

CO2 reduction per annum 262

•Automotivehigh-strengthsteelrefersbothtohigh-strengthsteel(HSS)withatenacityof590+MPaandadvancedhigh-strength steel (AHSS) with a tenacity of 440+ MPa. The CO2 reduction was calculated by estimating the amount of weight lost when applying HSS and AHSS to a Korean automaker’s passenger vehicle (with 2000cc displacement).

(Unit: 1,000 tons)

Delete 2008


CO2 reduction per annum 155

•High-gradegrain-orientedelectricalsteelreferstosteelsheetwithanironlossof0.98W/kgorlower.

•CO2 reduction throughout the product lifecycle (assuming the transformer is used for 30 years)

overall social Co2 reduction from using high quality grain-oriented electrical steel

(Unit: 1,000 tons)

Delete 2008


CO2 reduction per annum 1,538

•High-gradenon-orientedelectricalsteelreferstosteelsheetswithanironlossof4.70W/kgorlower.

•CO2 reduction throughout the product lifecycle (assuming the motor is used for 18 years)

overall social Co2 reduction from using high quality non-oriented electrical steel

(Unit: 1,000 tons)


ECO-FRIENDLy SLAG CEMENT

gReeN BusINess

CARBON MARKET

RHF facility

Blast furnace granulated slag, a by-product of iron-making, can be used as a replacement for clinker,* saving mineral resources such as limestone needed in clinker production and lowering CO2 emissions. In addition, recycled slag can result in the production of high performance concrete varieties. For example, slag cement is now used as an ingredient in the manufacture of mass concrete and marine concrete. The mixture of Portland cement is also about 5 percent slag. In 2009, some 7.14 million tons of blast furnace granulated slag from POSCO were used as substitutes for materials used to make cement, lowering CO2 emissions in society by an estimated 5.64 million tons.

*Clinker is an intermediate cement product made by sintering limestone and other raw materials.CDm pRojeCts

POSCO completed a small hydroelectric power plant at the Gwangyang Works in April 2009. The plant generates electricity(600kW) from the approximately 170,000 tons of water that is supplied daily from Sueo Dam through a pipeline with a 37.2m head. This alternative energy source helps to reduce CO2 emissions and creates another source of revenue. The Gwangyang Works hydroelectric power plant was registered as the first CDM(Clean Development Mechanism) project conducted by a Korean steelmaker and will secure 26,000 tons of certified emission reductions, or CERs, over the next 10 years. In addition, POSCO and Nippon Steel Corp. have been working on building a rotary hearth furnace (RHF) at the Gwangyang Works as a CDM project in 2009. The facility can annually handle up to 200,000 tons of sludge from the dust collectors in the iron- and steelmaking processes, as well as from the water treatment facilities. It also recovers useful raw materials such as iron from the waste being treated. Meanwhile POSCO has established an office in Latin America for local forestation projects.

ghg RegistRy

POSCO has been involved in the GHG registry organized by the Korea Energy Management Corp. since 2005. In 2009, the company acquired 776,000 tons of CERs through twelve GHG reduction projects. This experience has enhanced POSCO's climate change response capabilities and will

provide a way to enter the carbon trade market in the future.

CaRBon funDs

POSCO is participating in carbon funds inside and outside Korea to support the development of green technologies. One of these is the Asia Clean Energy Fund, which invests in clean energy businesses, include renewable energy and other CDM projects in emerging Asia, and another is the Carbon Emission Fund, organized by the Korean Ministry of Knowledge Economy.

Sueo Dam

Effective head: 37.2m

Conduit line length: 15km

Valve Small scale hydroelectric power plan

Electricity

Sediment Basins#1 & 2

Sediment Basins#3 & 4

Gwangyang Works

Substation (KEPCO)

Diagram of small hydroelectric power plant

Projects CO2 emissions reduction

Installation of FOG power plant 123

Installation of combined CCPP using waste gas at Gwangyang Works 234

Electricity generation from CDQ at Gwangyang Works (units 3 & 4) 321

Switch from bunker-C to LNG as auxiliary fuel for Gwangyang Works HRSG 8

Electricity consumption reduction by installing fluid couplings in roll cooling

water pumps at Gwangyang Hot Rolling Mill #2 0.5

Fuel consumption reduction by installing converter exhaust

gas boiler at Pohang Works 8

Installation of an 1MW solar power plant in Gwangyang Works 0.9

Electricity use reduction by installing energy-saving devices in air ventilation

system at Gwangyang Works 7

Electricity generation from installing blast furnace TRT at Gwangyang Works 20

Electricity generation from CDQ at Pohang Works (Unit No. 2) 47

Installation of 1MW solar power plant at Gwangyang Works 0.7

Installation of pre-heater for BFG power plant at Pohang Works (Hyeongsan #11) 6

2009 government-certified ghg Reduction performance (Unit: 1,000 tons)

CO2 emissions from burning fuel and processing raw materials 0.79 tons of CO2 emissions per ton of clinker

grinding and

mixing

Portland cement

Slag cement

Blast furnacegranulated slag

Raw materials, including limestone

and fuel

Cement Production Process

Production of raw

materialsMining

CalCinationS

CaCO3+Heat ¬ CaO+CO2

incheon Bridge

The Incheon Bridge, the world’s sixth longest (18.2km), is renowned for superior safety, including the ability to resist wind speeds of up to 72m/s. Blast-furnace slag cement was among the latest construction technologies applied to the bridge. High-strength concrete containing slag cement, which has high-durability and resistance to salt damage, was applied to increase the strength of the bridge.

slag powder producer posfine established

POSCO partnered with Ssangyong Cement, Tong Yang Cement and Lafarge Halla to establish POSFINE in November 2009. The newly established joint venture will produce slag powder, an ingredient in eco-friendly slag cement. A slag powder plant will be built by POSFINE at the cement loading terminal in Taein, Gwangyang between April 2010 and June 2011. Eventually, the plant will have a capacity of two million tons a year after a subsequent expansion. Molten slag is rapidly cooled to produce granules, which are then ground into slag power. Typically, at least 90 percent of all blast-furnace slag is granulated and sold as a cement ingredient.

winD tuRBines

POSCO E&C completed a wind farm at Hoengseong, Gangwon Province in December 2008. Ultimately, twenty 2MW wind turbines—nine at Hoengseong and eleven at Pyeongchang—will be built around the region, producing a combined 40MW of electricity. Operating these wind turbines is expected to reduce 63,000 tons of CO2 emissions a year. The constructor will establish additional offshore wind farms at Yeosu as well as in the Korean counties of Goheung, Yeonggwang, Wando and Sinan by 2015. Their total capacity will be 600MW.


POSCO is developing renewable energy technologies to help mitigate the effects of resource depletion and global warming. Thus, we are turning companywide green businesses into next-generation growth engines, while acquiring alternative energy sources in preparation for the transition from fossil fuels to hydrogen.

DEVELOPING RENEWABLE ENERGy WITH INVESTED COMPANIES

gReeN BusINess

solaR poweR plant

POSCO plantEC has installed 1MW-class rooftop solar power generators at the Pohang and Gwangyang Works. These are the first highest-capacity solar power facilities ever set up at an industrial site in Korea. The Gwangyang Works system became operational on the rooftop of Cold-Rolling Mill #4 on June 4, 2008. Eight days later, a similar system was completed on the warehouse

of the Steel Plate Mill at the Pohang Works.

Refuse-DeRiveD fuel

POSCO E&E is engaged in various waste-to-fuel projects. One of these is the refuse-derived fuel (RDF) program for turning inflammable municipal solid waste (MSW), which was previously simply incinerated or buried in landfills, into fuel that can generate electricity while distributing steam to where it is needed. In addition, a “sewage sludge-to-fuel” facility is drying and pelletizing the residual solids generated during sewage treatment. The pelletized sludge serves as an auxiliary fuel for coal-fired power plants, helping to replace conventional fossil fuels and reducing overall CO2 emissions. Additional RDF projects are under way in collaboration with the Busan and Pohang municipal governments. POSCO E&E plans to expand the program to all the major cities in Korea. The RDF plant being built in Busan will be the Asia's largest, burning 900 tons of MSW per day to generate 250MW of power.

smaRt Development

A project is currently underway to develop the new System-integrated Modular Advanced ReacTor (SMART), a low-carbon energy source, in cooperation with POSCO Family members involved in various materials, construction, plants and energy. POSCO is participating in efforts to receive SMART technology certification and standardized design approval in order to acquire the technology needed for a nuclear reactor with a 100MW capacity.

fuel Cells

POSCO Power has been developing technologies for power plant fuel cells since 2002 as part of efforts to enter the renewable energy sector. In September 2008, the company completed the world's largest manufacturing facility for fuel cell balance-of-plant (BOP). Each year, the facility can produce enough support and/or auxiliary components for power systems with 50MW in combined capacity. The fuel cell chemically generates electricity by combining hydrogen in the cell with oxygen in the atmosphere without emitting any GHG. Thus, this low-carbon power generation solution is gaining attention as a future, eco-friendly energy source. POSCO has teamed up with the Research Institute of Industrial Science & Technology (RIST), and Pohang University of Science and Technology (POSTECH) to secure original fuel cell technologies. Meanwhile, the company has signed a technology transfer MOU with US-based FuelCell Energy, the first to commercialize fuel cells and owner of some of the most advanced technologies in the industry. The CO2 intensity of the fuel cell power generation is only 63 percent that of a thermal plant in terms of tCO2/kWh. Meanwhile, POSCO concluded MOUs with Pohang City and Korea Electric Power Corporation (KEPCO) in May and August 2007, respectively, for joint fuel cell power plant projects. The goal is to develop a solid oxide fuel cell (SOFC) hybrid system with a capacity of 180kW by 2012.

Aerial view of waste-to-fuel power plantSolar panels at Pohang Works Facility for making fuel cells used in power plantsWind farm at Mt. Taegi

gas engine

gas turbine

Diesel

thermal power plants on average

fuel cell

182

175

111

233

171

Co2 emissions

(Unit: g-CO2/kWh)


2009 Carbon-neutral project

WITH THE COMMUNITy

POSCO Carbon-neutral Program kick-off ceremony (September 2009)

Interim presentation meeting (December 2009)

27

posCo CaRBon-neutRal pRogRam

The POSCO Carbon-neutral Program identifies and supports social GHG emission reduction projects conducted by various members of society. The program encourages people to proactively adopt a carbon-neutral lifestyle and raises public awareness of the need for GHG emissions reduction, helping to realize a low-carbon green society through cooperation between the corporate sector and the general public. Various groups such as schools, university societies, civic organizations, and homemakers have come up with their own ideas to offset carbon emissions and competed for program sponsorship. Ten teams and individuals were selected and will receive support to run their own projects for up to a year.

Details of CaRBon-neutRal pRojeCts

Eco SIFE at Sejong University: Used Paper Receptacle & Recycled Paper Notebook

The project aims to recycle used paper to make notebooks. The project managers help university students recycle the paper by setting out collection bins around the campus library for paper with one blank side and for wastepaper; the collected resources are then turned into notebooks. Collection managers and project PR ambassadors were selected in November 2009, and they have deployed collection bins on several campuses and managed the project.

"BomBom" Environmental Club at Bongmyeong High School:Recycling & Reducing Waste

The team reduced waste volume by placing bins to separate recyclable items from regular waste while staging a campaign to reduce the overall garbage volume. Separate bins were provided for garbage, paper, plastic, and other recyclables. As a result, the number of 100l waste bags used by the school was halved. In addition, homeroom classes that are keen on recycling will receive “Good Recycler” badges.

Green Rainbow at Chung-Ang University: Individual Tumbler Using Campaign

Green Rainbow is promoting the use of personal tumblers to reduce the amount of paper cups consumed on campus. The team also designs and sells unique tumblers, and team plans to collaborate with coffee shops around the university to ensure the tumbler users get discounts. On the drawing board are campaigns to encourage students to turn off idle computers and recycle waste. The team is also organizing programs for sharing books and distributing handmade handkerchiefs.

GreenlIFe

the ConCept of aDDing anD suBtRaCting to ReaCh zeRonew iDeas enaBle people to Coexist with natuRe.

POSCO has as many ideas on the environment as it has concerns. Our daily CO2 emissions can be offset by reducing GHG emissions and showing greater care for the planet. We believe that a healthy planet can be maintained if many small actions are brought together. In this belief, we have launched the POSCO Carbon-neutral Program, which all people are invited to join.

Winners

Eco SIFE at Sejong University

Housewives in Action from “Green Dure (cooperation) Community”

Association of Five Clubs at Universities inDaegu & North Gyeongsang Province

Green Rainbow, Industrial Economics Majors at Chung-Ang University

Pohang Branch of Green Consumer Network in Korea

Saeng-yeon Middle School

Science Club at Gwang-yeong Middle School

Department of Electrical Engineering at Dongguk University

Environment Club BomBom at Bongmyeong High School

University Association among Chungnam, Mokwon, and Hannam University

Projects

Recycling used paper on campus into notebooks

Making “half-carbon” homes by reducing energy consumption and food waste.

Installing green rooftops, encouraging bicycle riding, reducing food waste, and lowering energy consumption

Power-saving campaign, recycling bins, using the blank side of discarded paper, using cloth handkerchiefs, wearing thermal underwear

Free bicycle repair center, bicycle riding promotion

Recording one’s carbon footprint, keeping “green” diaries

Renewable energy experiential hall, recycling used cooking oil and office paper

Reducing the use of throwaway products, conserving electricity in the classroom

Publishing and distributing calendars of school grounds,recycling campaign

Recycling used office paper, bicycle rental service, recycling old banners

28 2009 CARBON RepORt gReeN lIFe

expanD viDeoConfeRenCing

POSCO has expanded the videoconference system to help reduce CO2 emissions by cutting the amount of business travel by employees. The company is currently building a network that links domestic worksites as well as POSCO Group affiliates. Future plans call for expanding the overseas videoconference network, which connects POSCO offices in more

than ten countries, including China, Japan, India, and Mexico.

“thRee no's” Campaign

The POSCO Seoul Office designated the POSCO Center as a "green building" in March 2009, and has implemented a campaign to eliminate paper cups, smoking, and paper waste on the premises. The POSCO HRD Center in Pohang has also announced a Green HDR Center campaign, encouraging employees to quit smoking, conserve resources, and commute by bicycle. To these ends, the Center has banned smoking inside all training facilities, discontinued the use of paper cups on campus, switched over to computer-based training materials (instead of handing out hard copies) and cut down on the amount of leftovers in the dining facility. Every Wednesday has been designated a “No-drive Day.”

eneRgy-effiCient BuilDing

POS Tower, completed in April 2009, is a steel structure where fully recyclable, eco-friendly steel is extensively used. The building boasts an LED lighting system rather than using fluorescent bulbs, which is expected to lower CO2 emissions by 145 tons a year. A Green Roof Garden is on top of the building, and 810 solar photovoltaic power generation modules are installed in the outer walls, generating 42MWh a year, enough power for lighting two floors of the building.

tRee-planting aCtivities

More than 2.12 million trees have been planted around the Pohang Works and nearby residence areas. Management aims to ensure that 35 percent of the worksite is green areas. To this end, POSCO had spent about W9 billion between 2008 and 2009 on planting an additional 300,000 evergreen broad-leaved trees. The Gwangyang Works also planted more than 2.95 million trees, keeping its green space ratio at 45 percent. The steelworks plans to spend w16.5 billion on another 270,000 trees through 2010. Assuming each tree can annually absorb about 5.6㎏ of CO2, POSCO’s greening efforts as a whole are expected to capture 28,000 tons of CO2 a year.

eCo-fRienDly vehiCles on woRksites

POSCO employees get around their worksites quickly via the joint-use "8282" vehicles, which are steadily being switched over to hybrid and electric vehicles. The company can reduce Source 2 CO2 emissions by adopting these eco-friendly modes of transportation.

posCo family gReen walk Campaign

POSCO launched the Green Walk campaign to bring employees together in pursuit of a greener world. The program encourages employees to conduct the four energy-saving activities (Walk, Switch Off, Reduce and Recycle) for lowering CO2 emissions while also participating in environment protection. In the future, Green Walk classes for education and camps will be organized for the family members of employees.

eCo-DRiving Campaign

POSCO has strengthened the current weekly “No-drive Day” campaign to “No-drive Once Every Three Days,” as far as conditions of individual worksites allow. Employees are asked to develop eco-friendly driving habits such as slow acceleration, no hard stops, and no speeding. In addition, commuter shuttles for employees of POSCO, affiliates and suppliers have been in operation since 2003, while all employees are encouraged to carpool. Moreover, bicycle-only lanes have been established on worksites and parking lots now offer free bike-rentals. Meanwhile, the amount of bicycle riding has increased significantly with the two-pronged effects of “No-car Day” and “Bike-riding Day.”

“Winning the contest and receiving assistance is just the beginning. What really matters is to put the idea into practice. I wish more students would voluntarily participate in this project,” said Used Paper Recycling project manager Yu I-gyeong (senior, Dept. of Bioengineering at Sejong University) in an interview after the competition. The project, named “Recycling Used Paper and Making Notebooks,” aims to collect used paper in containers that have been set out around campus and recycle it into notebooks. The team initially planned the idea in March 2009 but had trouble carrying it out due to budget constraints and other problems. However, inspired by the POSCO Carbon-neutral Program competition, the team was able to keep the project alive. Ms Yu expressed her hope that more students will join the low-carbon movement and heighten their awareness of the need for environmental protection.

Interview with the Carbon-neutral Project Team (Eco-SIFE at Sejong University)

How How can we lead an environment-friendly lifestyle amid accelerating global warming? I think the answer lies in riding a bicycle. We can protect the environment, conserve energy, get healthier and avoid traffic jams all at the same time, said Deputy Manager Hwang Hwa-seop, who has been a bicycle commuter for the past 15 years. “I’ve traveled more than 110,000 km on my bike over 15 years. It’s good for health among many other benefits such as reducing energy consumption. Moreover, riding a bicycle is a good way to prepare for the day's work. During the 25 minutes from home to work, I just keep focusing on pedaling and feeling more confident about myself,” said Mr Hwang. Mr Hwang wears highly-visible red clothes to ensure that drivers can see him on the road. In addition, he has put a headlamp and safety reflectors on his bike, and also wears a reflective and illuminating vest, shoes and cap. Amid increasing awareness about the environment, many employees are or will be riding bicycles to go to and from work. He adds that riding safety should always be their first priority.

Interview with bicycle commuter (Deputy Manager at Iron Making Dept. Hwang Hwa-seop)

INTERVIEW

“I want to make paperrecycling an eco-friendly trend at universities.”

“Commuting by bicycle gives you four major benefits”

AT THE WORKPLACE


POSCO is participating in discussions on the Global Steel Sectoral Approach (GSSA), which have been carried out by the World Steel Association since April 2007. The dialogue seeks practical responses to climate change and ways to lower CO2 emissions internationally. To this end, the WSA has developed a CO2 data collection that can objectively determine the GHG emission volumes for steelmakers around the world. POSCO earned the Climate Action badge from the organization by

participating in its GHG emissions evaluation program.

POSCO is participating in the Steel Task Force of the Asia-Pacific Partnership on Clean Development and voluntary GHG reduction. Unlike inter-governmental organizations, the Partnership is a public-private sector collaboration for voluntary GHG reduction, not a compulsory commitment as mandated by the Kyoto Protocol, and GHG reduction is pursued through more efficient technologies. Currently, the partnership includes seven major Asia-Pacific countries—Australia, Canada, China, India, Japan, Korea, and the United States. A total of five projects are under way: (1) workshop on interchange of technologies, (2) surveys on the status of energy saving facilities by each country, (3) the identification of potential GHG emission reductions and establishment of voluntary targets (4) technology transfer through the dispatch of experts, and (5) the publication of a state-of-the-art clean technology handbook. POSCO is the project leader of (3) “the identification of potential GHG emission reductions and establishment of voluntary targets.” The 7th Steel Task Force Meeting was held in Washington DC, in May 2009, followed by the 8th Meeting in Toronto in October.

POSCO signed an agreement with Korea Energy Management Corp. to provide technology support to help domestic small and medium-sized enterprises (SMEs) reduce their energy consumption. The company has already been transferring energy-conservation technologies and providing on-site guidance to SMEs in the steel industry since 2007. POSCO engineers are regularly dispatched to ten companies, providing technical support and guidance in the operation of heating furnaces, management methodologies and heat efficiency analysis.

31

climate action logo

ASIA-PACIFICPARTNERSHIP ON CLIMATE CHANGEClean Development andVoluntary GHG Reduction

WORLD STEELASSOCIATION CLIMATE ACTIONGHG Emission Data Collection

GREEN ENERGyPARTNERSHIPTechnological Support forDomestic SMEs

Engineers troubleshooting a heating furnace at an SMEAPP Steel Task Force Meeting in Busan, Korea (’08.4)WSA Environmental Council Meeting in Victoria, Canada

Green

partnershIp

tRue paRtneRships aRe not aBout woRDs But aCtion. we aRe DeDiCateD to helping ensuRe a gReeneR woRlD anD ouR effoRts will not stop until the whole woRlD gets gReeneR.

We are creating a world in which all of us move together to keep the environment clean. POSCO has strengthened environmental partnerships with international bodies such as the World Steel Association (WSA) as well as with small and medium-sized enterprises in Korea, and POSCO has joined the Asia-Pacific Partnership, which is collaborating on clean development and voluntary GHG reduction in the steel industry.


RespeCtive ResponsiBilities of the managementof posCo anD samil pricewaterhouseCoopers

The management of POSCO is responsible for preparing the subject

matters in accordance with the criteria set forth in the POSCO GHG

Accounting Guidelines.

Our responsibility is to provide a conclusion on the subject

matters based on our assurance procedures in accordance with the

International Standard on Assurance Engagement 3000 (Revised) –

‘Assurance Engagements other than Audits or Reviews of Historical

Financial Information’ issued by the International Auditing and

Assurance Standards Board (“ISAE 3000”).

This report, including the opinion, has been prepared for the

management of POSCO as a body, to assist the management in

reporting on POSCO’s carbon emissions performance and activities.

To the fullest extent permitted by law, we do not accept or assume

responsibility to anyone other than the management of POSCO as

a body and POSCO for our work or this report save where terms are

expressly agreed and with our prior consent in writing.

We read the other information included in the Carbon Report,

including the information in the management commentary for

POSCO, and considered whether it is consistent with the subject

matters. We consider the implications for our report if we become

aware of any apparent misstatements or material inconsistencies

with the subject matters. Our responsibilities do not extend to any

other information.

assuRanCe woRk peRfoRmeD

We conducted our engagement in accordance with ISAE 3000. For the

subject matters of direct & indirect CO2 emissions per ton of crude

steel, our work included examination, on a test basis, of evidence

relevant to the subject matters. It also included an assessment of

the significant estimates and judgments made by management in

the preparation of the subject matters. We planned and performed

our work so as to obtain all the information and explanations that

we considered necessary in order to provide us with sufficient

evidence on which to base our opinion. For the subject matters

of CO2 reduction in society, our work included primarily inquiries

of company personnel and analytical procedures applied to the

subject matters. We planned and performed our work so as to obtain

moderate assurance as to whether the subject matters are free of

material misstatement.

inheRent limitations

Non-financial performance information is subject to more inherent

limitations than financial information, given the characteristics

of the subject matter and the methods used for determining such

information. The absence of a significant body of established practice

on which to draw allows for the selection of different but acceptable

measurement techniques which can result in materially different

measurements and can impact comparability. The precision of

different measurement techniques may also vary. Furthermore, the

nature and methods used to determine such information, as well as

the measurement criteria and the precision thereof, may change over

time. It is important to read the subject matters in the context of the

POSCO GHG Accounting Guidelines.

In particular, the conversion of material used to carbon emissions

is based upon, inter alia, information and factors derived by

independent third parties as explained in the POSCO GHG Accounting

Guidelines. Our assurance work has not included examination of the

derivation of those factors and other third party information.

opinion

Based on the results of our procedures:

• In our opinion, direct (Scope 1) & indirect (Scope 2) CO2 emissions

per ton of crude steel for the year ended 31 December 2009 are

fairly stated, in all material respects, in accordance with the

POSCO GHG Accounting Guidelines.• Nothing has come to our attention that causes us to believe that

CO2 reduction in society is not presented fairly, in all material

respects, in accordance with the POSCO GHG Accounting Guidelines.

gReeN pARtNeRsHIp

POSCO has disclosed its CO2 emissions level and efforts to deal with climate change through the annual Sustainability Report and on its official website. Moreover, the company has been included in the SAM-DJSI and has participated in the Carbon Disclosure Project since 2003. By doing so, POSCO has allowed a third party to evaluate its climate change responses objectively. The POSCO Climate Change Forum convenes with experts on climate change and other distinguished scholars from the world over. Meanwhile, the company maintains communication with the government, academia and research institutions to remain informed on international trends and seek cooperation in reducing CO2 emissions. Various seminars and lectures both on and off university campuses are additional venues for getting the word out on POSCO’s responses to climate change.

POSCO signed an MOU with the Korean government to respond to changes in the ocean climate in 2007. As part of this effort, the company developed the ‘Triton’* brand artificial reef to help restore marine habitats destroyed by rising sea temperatures. Triton is a quick way to repair damaged marine ecosystems and resources, including algae and shellfish. The main material for Triton is steel slag, a by-product of steelmaking that is richer in calcium and ionized iron, and which is beneficial for ecosystems than ordinary aggregate is. The presence of these minerals stimulate s the growth and photosynthesis of algae, and purifies contaminated seawater and sediment. In addition, Triton’s sea forest is capable of CO2 fixation from carbonization and seaweed photosynthesis.

* Triton is a Greek god and messenger of the sea. According to Greek mythology, he blew on his shell trumpet to summon fish and dolphins and restore damaged marine forests.

OCEAN CLIMATE CHANGE PARTNERSHIP

CARBON COMMUNICATION

POSCO Sustainability Report 2005~2008

INDEPENDENT ASSURANCE REPORT

to the management of posCo

We have been engaged by the management of POSCO to perform certain independent assurance activities in regards to the following aspects of POSCO’s 2009 Carbon Report (hereinafter jointly referred to as the subject matters):

• Direct (Scope 1) & indirect (Scope 2) CO2 emissions per ton of crude steel for the year ended 31 December 2009 as described in table on page 13. Information in respect of the years ended 31 December 2008, 2007 and 2006 is not within the scope of this work.

• CO2 reduction in society in table on page 13.

6Co2+6h2o→C6h12o6+6o2

C02 absorptionCaCo3 Ca2+

Co32-

steelmaking slag

Co2 dissolution

Co2 fixation through slag mineral Carbonation and algae photosynthesis (10~20 t-CO2/ha, RIST)

CO2 fixation through carbonation (slag + flue gas CO2)

Triton sea forestation(carbonized slag + slag cement)

CO2 fixation through algae photosynthesis

Samil PricewaterhouseCoopers

January 26, 2010

GRI/SAM DJSI/CDP INDEX� Fully / partly Reported Not Applicable ▲ Not Available

gRi inDiCatoRs

3 direct energy consumption by primary energy source 17 �

4 Indirect energy consumption by primary source 17 �

5 energy saved due to conservation and efficiency improvements 16 �

6 Initiatives to provide energy-efficient or renewable energy based products and services,

24, 25

� and reductions in energy requirements as a result of these initiatives

7 Initiatives to reduce indirect energy consumption and reductions achieved 16 �

16 total direct and indirect greenhouse gas emissions by weight 13 �

17 Other relevant indirect greenhouse gas emissions by weight 13 �

18 Initiatives to reduce greenhouse gas emissions and reductions achieved 12 �

Indicator Description Reference Extent of

Reporting

CDp inDiCatoRs

1 Regulatory Risks related to climate change 10 �

2 physical Risks exposed to climate change 10 �

3 Other Risks as a result of climate change 10 �

4 present Regulatory Opportunities exposed to climate change 10 �

5 present physical Opportunities exposed to climate change - ▲

6 Other Opportunities as a result of climate change 10 �

7 Reporting Year that state the start date and end date C2 �

8 Reporting Boundary that describes the company, entities, or group for 13, 15

� which scope1 and scope 2 gHg emissions are reported

9 Methodology to Calculate scope 1 and scope 2 gHg emissions 13 �

10 scope 1 direct gHg emissions 13 �

11 scope 2 Indirect gHg emissions 13 �

12 Contractual Arrangements supporting particular types of electricity generation -

13 scope 3 Other Indirect gHg emission 13 �

14 emissions Avoided through use of goods and services 21 �

15 Carbon dioxide emissions from Biologically sequestered Carbon -

16 emissions Intensity 13 �

17 emissions History 13 �

18 external Verification / Assurance 33 �

19 data accuracy 33 �

20 energy and Fuel Requirements and Costs 17 �

21 eu emissions trading scheme -

22 emissions trading, providing details of any emissions trading schemes, other than the eu ets 23 �

23 Reduction plans 12 �

24 planning; the cost of future emissions into capital expenditures and investment decisions? 12 �

25 Responsibility; a Board Committee or other executive body have overall responsibility 11 �

26 Individual performance 12, 13 �

27 Communication 32 �

28 public policy 12 �


Reporting

sam Djsi inDiCatoRs

please provide your company's direct greenhouse gas emissions (dgHg sCOpe 1) for 35 the part of your company's operations for which you have a reliable and auditable data 13 � acquisition and aggregation system.

please provide your company's indirect greenhouse gas emissions from energy purchased 36 (purchased and consumed, i.e. without energy trading)(IgHg sCOpe 2) for the part of your company's 13 � operations for which you have a reliable and auditable data acquisition and aggregation system.

37

please provide your company's energy consumption for the part of your company's operations for 17

� which you have a reliable and auditable data acquisition and aggregation system.

43

does your company use CO2 intensity as a management KpI? If yes, please provide the definition of 15

� the carbon intensity used as well as the value for financial year 2008.

44

please indicate your company's corporate targets to reduce direct greenhouse gas emissions, 12

�

either in absolute emissions or emission intensity terms or both.

45 As part of scope 3 in the gHg protocol, please indicate how your company considers gHg emissions

13

� for your company's supply chain (upstream), customers (downstream) and support services.

46

Has your company undertaken a sensitivity analysis of the impact on financials if energy prices 10

� (fossil fuels, electricity) strongly increase or a tax is put on CO2 emissions?


Reporting

Head Office

1, Goedong-dong, Nam-gu, Pohang City, Gyeongsangbuk-do 790-300, Korea

SeOul Office

POSCO Center, 892, Daechi-dong, Gangnam-gu, Seoul 735-284, Korea

POHang WOrkS

5, Dongchon-dong, Nam-gu, Pohang City, Gyeongsangbuk-do 790-360, Korea

gWangYang WOrkS

700, Gumho-dong, Gwangyang City, Jeollanam-do 545-711, Korea

2009CARBON REPORTAll living things on earth are bound together like pieces of a jigsaw puzzle. POSCO will be a reliable friend of thepolar bear who seeks ice to rest his body on. We will always be there until the last piece of the puzzle is put in place.

WWW.POSCO.COm

38

The official POSCO homepage (www.posco.com) provides you with additional information, and you can download a PDF version of this Report free of charge. If you have any comments or questions regarding this Report, please contact us at the following address

e-mail_ [email protected] Tel_ 02-3457-1400, 054-220-0994 environmenT Team, posco corp._ 1, Goedong-dong, nam-gu, pohang city, Gyeongsangbuk-do 790-300, korea

ReadeR Feedback FoRm

We welcome your feedback and opinions about this report. Your responses will help us improve subsequent editions of the POSCO Carbon Report. POSCO stands ready to answer the questions from any stakeholder. Please fill the following questionnaire and send it back via mail or fax to the address below.

1. Are you sAtisfied with this report?

□ Very satisfied

□ Somewhat satisfied

□ Neutral

□ Somewhat disappointed

□ Very disappointed

2. whAt is your primAry interest?

□ POSCO’s vision to tackle climate change and GHG reduction target

□ GHG emissions performance

□ Carbon management-related risk management and □ corporate governance

□ Green Steel □ Green Business

□ Green Life □ Green Partnership

3. pleAse, feel free to stAte Any comment or

suggestion regArding this report.

4. which of following cAtegories Are you in?

□ Customer

□ Shareholder

□ POSCO employee

□ Supplier

□ Government

□ Steel industry employee

□ Non-steel industry employee

□ Civic organization

□ Local resident

□ Analyst

□ Student

□ Research institute

□ Other

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