Carbon report 2010 - main | POSCO · Business Strategy with Climate Change Integration . Since the first POSCO Environmental Report was released in 1995, we have regularly disclosed

Carbonreport2010

t o w a r d F o u r G r e a t s

02 ceo’S meSSage

06 IntroductIon

16 green Steel

24 green BuSIneSS

30 green lIfe

36 green PartnerShIP

40 PoSco famIly

2010 Carbon report

POSCO recognizes the global environmental issues stemming from climate change and has been implementing responses to mitigate the problem.

The 2010 Carbon Report analyzes the degree of interest by stakeholders in POSCO’s carbon management program and presents climate change

response strategies as well as the results of efforts to reduce greenhouse gas emissions. It is hopes that readers will use the information here in as

a reference in their own decision making.

Business Strategy with Climate Change Integration

Since the first POSCO Environmental Report was released in 1995, we have regularly disclosed

information on our corporate environmental efforts. Starting in 2003, our annual 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. In

February 2010, we published a carbon report verified by a third party for the first time in the global

steelmaking industry. The 2010 Carbon Report explains our carbon management framework more

elaborately in the light of our corporate vision and strategies. In addition, this year’s publication incudes

for the first time the actions taken by major POSCO-invested companies to respond to climate change.

Professional Review & Third-party Verification of Data

The data and other contents in the 2010 Carbon Report were reviewed by experts from POSCO

and from 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 Framework

The 2010 Carbon Report was compiled according to the G3 Guidelines of the Global Reporting

Initiative (GRI) and POSCO Carbon Reporting Procedures. The financial data contained herein were

determined on the basis of Korea’s corporate accounting standards. The amounts of GHG emissions

at the Pohang and Gwangyang Works 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 2010 Carbon Report covers the period between January 1 and December 31, 2010. The

Report also includes figures for previous years to help readers understand the POSCO’s performance

over the past few years.

Report Scope

The 2010 Carbon Report details the climate change response programs and their respective results

at the Pohang Works, Gwangyang Works, Pohang Head Office and Seoul Office. Also covered are

actions taken to address the problem of climate change by seven companies and institutions in Korea

in which POSCO is invested.

Report Distribution and Feedback

This 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.

For detailed information, please visit POSCO homepage (http://www.posco.com).

REPORT FEATURES

02

2010 CARBON REPORT

To Our Stakeholders

We made great strides toward the future in 2010, thanks in large part to your support. Important among them was the proclamation of our “Vision 2020,” which states our intention of having the POSCO Family of companies achieve annual sales of KRW 200 trillion and be sustainable in all aspects of operation over the next decade.

The “low-carbon economy” is a new paradigm to appear on the global stage, and we are changing fast at POSCO to remain in step with this new reality. For us, “low-carbon, green growth” refers to our reducing GHG emissions while at the same time approaching green business areas as new growth engines. This important paradigm serves as the basis for us to achieve POSCO Vision 2020.

In February 2010, we officially announced the POSCO vision for low-carbon and green growth as well as our voluntary GHG reduction target by 2020, which will be 9 percent lower than the average CO2 intensity between 2007 and

CEO's Message

“We summarize our corporate strategies at POSCO as ‘green steel,’ ‘green business,’ ‘green life,’ and ‘green partnership.’ These strategies are pursued according to four ideals that we call ‘Great Challenger,’ ‘Great Voyager,’ ‘Great Workplace,’ and ‘Great People.’ Our carbon management program is designed to make POSCO a global leader in realizing low-carbon green growth through constant change and innovation. I ask for your interest in and encouragement for our endeavors in this regard.”

03

April 2011 CEO

JOON-YANG CHUNG

2009. In December of that year, we launched the “POSCO Family Global Environmental Management System,” which expands our environmental management program to all POSCO Family companies as well as to POSCO’s overseas operations.

We are concentrating our corporate competencies on realizing four ideals in order to achieve Vision 2020. The first, which we call “Great Voyager,” is to identify and develop outstanding new business lines for each of our existing operations. The second, “Great Challenger,” is to expand our workplaces globally. Third, “Great Workplace,” is to secure the requisite drivers of an unsurpassed operation system. Last but not least is “Great People,” We will cultivate multitalented people who can perform superbly in a global environment.

We summarize our corporate strategies at POSCO as “green steel,” “green business,” “green life,” and “green partnership.” These four goals are pursued according to the four “Great” ideals detailed above. We continue our transition to “green steel” by (1) maintaining the highest energy efficiency in the world steelmaking industry through the development and application of innovative steelmaking technologies to reduce CO2 emissions, (2) by expanding uses for energy-efficiency steel products, and (3) by linking our carbon management program to the global standards that govern our industry. To carry out our “green business” strategy, we are joining with other members of the POSCO Family to expand involvement in new and renewable energy sources such as fuel cells and solar power generation. Moreover, this expansion is taking place inside and outside Korea. Our green life programs are designed to raise awareness of the need for all people to “go green.” For example, the Green Walk Campaign encourages the more than 35,000 employees of POSCO Family companies and their own family members to adopt environment-friendlier lifestyles. In addition, the POSCO Carbon Neutral Program supports a project to reduce GHG emissions in society at large. POSCO management also understands the importance of green partnerships with steelmakers and governments around the world as one way to mitigate the problem of global climate change. We are now actively involved in such international programs as the Asia-Pacific Partnership on Clean Development and Climate. The POSCO low-carbon green growth vision was launched with the public proclamation we made in 2010. This, our second annual Carbon Report details the results that we achieved during Year 1 of this ambitious new direction for all the people at POSCO. The opinions or stakeholders like you who read this report are important in determining the decisions made by everyone here at POSCO, myself included. I ask for interest in and support for the challenges and changes that are ongoing at POSCO so that we can improve both the protection of the earth’s environment as well as the future competitiveness of steel in the world.

04

2010 CARBON REPORT

The 2nd annual POSCO Carbon Report is issued

We became the first steelmaker to publish a third-party-verified carbon report in 2010 in order to inform stakeholders that we are aware of climate change and explain what we are doing to address this issue. In 2011, we publish the second Carbon Report.

This document explains the performance of our GHG emission reduction efforts in 2010, when we declared the vision of low-carbon green growth.

In February 2010, POSCO announced the vision of low-carbon green growth with a voluntary greenhouse gas reduction target. The goal was to reduce CO2 emissions from the production of each ton of crude steel by nine percent by 2020 compared to the average CO2 intensity between 2007 and 2009. Our efforts resulted in lowered CO2 intensity in 2010, which stood at 2.13 t-CO2/t-S, down 2.3 percent compared to the base period.

An investment of KRW 80.3 billion was completed in 2010 for building and improving facilities to raise energy efficiency.

Between 1999 and 2008, POSCO invested a total of KRW 1.43 trillion for major energy facilities such as coke dry quenchers and top-gas recovery turbines. In 2010, the investment of KRW 80.3 billion was completed for major projects. At the same time, research has been focused on developing breakthroughs for further lowering CO2 emissions. These include CO2 capture from the by-product gases of iron-making, heat energy recovery, and hydrogen steelmaking.

The Uruguay forestation project was listed in UNFCCC’s CDM.

POSCO is involved in a forestation project in east central Uruguay, through which 206,000 tons of certified emission reduction (CER) will be obtained over the next 30 years. The POSCO Family is also involved in renewable energy projects. In October 2010, a groundbreaking ceremony was held for refuse-derived fuel facilities in Busan, Korea and an overseas photovoltaic power generation project is under way.

POSCO Family employees and their family members are involved in the Green Walk campaign.

The program encourages POSCO employees and their family members to conduct the four energy-saving activities (Walk, Switch Off, Reduce and Recycle) for lowering CO2 emissions. Moreover, the second POSCO Carbon-neutral Program supported ten carbon-neutral projects conducted by university students.

The CDP named POSCO among the leading groups.

POSCO was the only steelmaker to be listed among top performers on the Carbon Disclosure Leadership Index (CDLI) and the Carbon Performance Leadership Index (CPLI) in the Carbon Disclosure Project 2010 Global 500 Report. POSCO is also participating in the discussion on responses to climate change of the World Steel Association and in the Steel Task Force of the Asia-Pacific Partnership on Clean Development and Climate.

This report contains information on the POSCO Family’s efforts to respond to climate change and the results achieved therefrom.

The activities of POSCO Specialty Steel, POSCO Power, POSCO C&C, POSCO Chemtech, SNNC, POSCO AST and POSTECH, which are subject to the Korean government’s GHG & Energy Target Management Scheme, were all covered.

POCSO

2020

Green Steel

Green BuSineSS

Green life

Green PartnerShiP

POSCO family

Executive Summary

05Towa r d Fo u r G r e a t sG r e a t C h a l l e n g e r, G r e a t Voya g e r, G r e a t Wo r k p l a c e , G r e a t Pe o p l e

We are transitioning toward a “Great Challenger” business portfolio that balances steel with non-steel segments, traditional with future-oriented areas, and manufacturing with services. We are also developing into a “Great Challenger,” with our operations being extended from POSCO to other POSCO Family companies as well as from Korea to the rest of the world. A “Great Workplace” model is being adopted that uses an advanced “Family” management system, thrives on openness and synergy, and is oriented toward the future. Finally, we are cultivating “Great People,” equipped with the creativity and willingness to take on challenges so that we can lead in the future of our global industry.

A materiality assessment of the POSCO Sustainability Report in 2009 revealed that climate change is a matter of great public concern and has a major impact on business. Therefore, the decision was made to publish a carbon report to inform stakeholder of what POSCO is doing to address the climate change issue. The 2009 POSCO Carbon Report was verified by an independent third party for the first time in the global steelmaking industry. A materiality assessment was conducted in 2010 to analyze issues of great business impact and stakeholder concerns regarding POSCO’s carbon management. As a result, twelve issues were identified and the 2010 Carbon Report details POSCO’s efforts and performance with regard to them.

I R O N & S T e e l M A K I N G P R O C e S S e S

IdEnTIFy KEy ISSUES

PRIORITIzE ISSUES

REVIEW PUblISh ThE REPORT

External Issues

Refer to global assessment organizations (SAM DJSI, CDP) and global guidelines (GRI G3)

Analyze media coverage domestic and overseas between Jan. 1 ~ Dec. 31, 2010

Internal Issues

Review POSCO mid-/long-term strategy and directives, internal policy and systems

Analyze the importance of issues and prioritize them

Criterion #1: Stakeholder attentionCriterion #2: Business impact

Review by internal and external experts

Report to top management

Verify the Carbon Report by an independent third party

Improve Carbon Report publishing process

1 2 3 4Materiality Test Process

InTROdUCTIOn

06

Carbon dioxide accounts for the majority of the greenhouse gases emitted by the steelmaking industry. This CO2 is generated from the burning of 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 of the GHG emissions in the entire steelworks. The steel that results is used as essential material for many different industries, including shipbuilding, automobile manufacture, construction, civil engineering and consumer electronics.

Converter (Basic Oxygen Furnace)

Continuous caster

Iron ore and coke are placed at the top of the blast furnace. Huge quantities of hot air are blasted into the

bottom of the furnace, and liquid iron collects at the bottom after the reduction reaction is carried out.

The primary process that produces liquid iron

Once the non-process elements have been

removed, the molten metal is conveyed to the

continuous casters, which turn it into intermediate

products such as slabs, blooms or billets.

Solidifying the liquid metal

The molten iron produced in the blast

furnace contains many non-process

elements, including carbon, phosphorus

and sulfur. These are removed by

blowing high-purity oxygen through the

molten metal.

Refining the liquid iron to produce steel

Iron-making Steelmaking Casting

Coke

Calcination

Limestone

Iron ore

Coal

Blast furnace

Awards & Qualifications

2005-2010 Listed on the Sustainable Asset Management Dow Jones Sustainability Index

for 6th straight year

2010 Named among the best-performing group in carbon disclosure and GHG

emission reduction in the 2010 CDP Report

2008-2010 Selected Outstanding Enterprise for Climate Change Response,

by Korea CDP Committee for 3rd straight year

2010 Events to Address Climate Change

Feb 3 Voluntary GHG emission reduction target announced (at the 7th Presidential Committee on Green Growth meeting presided over by the President)

Jul 2 Kick-off ceremony held for the 2nd POSCO Carbon-neutral Program

Jul 23 and Dec 27 3rd and 4th POSCO Family Green Growth Committee meetings held

Oct 7 Construction work begun on refuse-derived fuel project in Busan

Oct 28 Kick-off ceremony held for POSCO Family Green Frontiers

Dec 3 The Uruguay forestation project registered as a UN CDM

Dec 15 In-house workshop held on compensation schemes for GHG emission reduction

Dec 27 POSCO Family declares commitment to global environmental management

C O R P O R A T e O v e R v I e W

POSCO was established in 1968 and currently operates two integrated steelworks in Korea, one at Pohang and the other at Gwangyang. In 2010, the company earned more than KRW 5.47 trillion in operating income on sales of more than KRW 32.58 trillion. Crude steel output reached 33.7 million tons for the year. The POSCO Family is preparing for a major growth surge with the aim of achieving KRW 200 trillion in combined annual sales by 2020. To this end, we will build additional integrated steelworks outside Korea, advance into renewable energy and other new green growth businesses, and transform into an integrated materials maker that produces ferronickel, magnesium and other materials.

Priority Assessment Matrix

Cooperation for Carbon Reduction policy

Carbon disclosure

Activities to reduce GHG emissions at sites

Climate change response strategy

GHG emission reduction target

New green businesses

Performance of carbon management (index)

Carbon accounting

GHG emission reduction efforts through products and byproducts

Management risk related to climate change

Carbon management governance

Participation in carbon market

1

2 4

6

8

9

12

11

7

5

3

10

Business Impact

Stak

ehol

der A

ttent

ion

LOW

LOW

MEDIUM

MED

IUM

HIGH

HIGH

07

Hot rolling mill

Cold rolling mill

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.

Rolling

Producing steel sheet or wire

Importance Ranking

Cooperation for Carbon Reduction policy

Carbon disclosure

Activities to reduce GHG emissions at sites

Climate change response strategy

New green businesses

Performance of carbon management (index)

Carbon accounting

GHG emission reduction efforts through products and byproducts

Management risk related to climate change

GHG emission reduction targetCarbon management governance

Participation in carbon market

08

2010 CARBON REPORT

08

CARBON RISK & OPPORTUNITYMANAGEMENT

Low-carbon green growth is a key paradigm for enabling humankind to achieve sustainable development. Steelmaking is an energy-intensive industry on the one hand, while it provides the iron and steel necessary to build a sustainable society on the other. We recognize that the paradigm shift to low-carbon green growth poses both risks as well as opportunities for our business. The POSCO climate change response program seeks to minimize the business risks from climate change while maximizing the opportunities available. The focus is on strengthening corporate competitiveness even as the world advances into the era of low-carbon green growth.

POSCO has built an internal system for managing climate change risk. The risk and opportunity factors associated with climate change are identified, assessed and analyzed by the system regularly. This process is closely linked to our enterprise risk management system, and the key climate change risk and opportunity factors are regularly reported to the POSCO Family Green Growth Committee, which is chaired by the POSCO CEO. The results of the Committee’s discussions are reflected in making decisions for future investment and mid-/long-term business strategies. Information on POSCO’s management performance for such risks and opportunities is disclosed transparently to external stakeholders via the third-party-verified Carbon Report, the Sustainability Report and written answers to inquiries of external organizations.

Perspectives & Approaches

System & Process

RISK & OPPORTUnITy IdEnTIFICATIOn

Ascertain climate change risk and opportunity factors

Determine risk factors related to climate change- Pinpoint physical and regulatory risk factors- Assess risk levels and financial implications

Discover opportunity factors related to climate change - Identify opportunities in carbon market and green businesses- Determine global trends and strengthen risk management

CARbOn MAnAGEMEnT SySTEMBuild carbon management system

ChECK And REVIEWexamine climate change response activities

COMMUnICATIOnReports to top management

ACTIVITyPromote climate change response activities

Build the POSCO Carbon Management System (2006)

Build and manage a CO2 inventory with a third party verification of CO2 emissions

Assess the effects of new businesses and processes on CO2 emissions

Manage climate change risks in each area and promote new green growth businesses

Assess the progress of GHG emission reduction activities regularly in each area- Examine the status of response to government regulations and policies regarding climate change

- Examine the status of new green businesses POSCO-wide

POSCO Family Green Growth Committee report (biannually)

Subcommittee activity reports and discussion (quarterly)

POSCO Family Environmental Management Committee, chaired by the CEO (when needed)

POSCO Carbon Risk & Opportunity Management Process

InTRO > GREEN

STEEL > GREEN BUSIN

ESS > GREEN LIFE > GREEN

PARTNERSHIP

0909Unusual weather patterns persisted around the globe throughout 2010, and the Korean Peninsula was no exception. An unprecedented rainy season, scorching heat and heavy snowfalls affected transportation, logistics, manufacturing and other sectors of the economy. POSCO identified interruptions to raw material, water supply, and higher logistics costs as major material risks from unusual weather. Our storm & flood damage monitoring centers at Pohang and Gwangyang, where our steelworks are located, are in operation around the clock and their role is expanding and growing stronger.

The Korean government enacted the Framework Act on Low Carbon, Green Growth in 2010, and carbon-related regulations were put into full force, to include the greenhouse gas and energy target management scheme. POSCO sees such regulatory-related risks as having the greatest influence on the entire value chain. In particular, steelmakers in neighboring Northeast Asian countries are POSCO’s biggest rivals, and those countries do not all follow the same rules with respect to carbon control. In this sense, risks associated with carbon regulations are linked national competitiveness. Given these circumstances, POSCO is working proactively to lower GHG emissions inside and outside the company, while at the same time promoting cooperartion between the public and private sectors with regard to carbon policy.

Climate change risk is becoming an actual problem, and the scope of its effect is expanding. Accordingly, POSCO is responding to the changes in regulations and markets and seeking out various ways to turn the evolving situation into opportunities. Foremost on this agenda is to identify green business areas that can become new growth engines and then to invest aggressively in those areas.

Major Risks and Opportunities in 2010

Risk & Opportunity Factors in POSCO’s Carbon Management

S Green Steel B Green Business l Green Life P Green Partnership

The possibility of increased flooding, heavy snowing 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.

The company faces a cost burden and the risk of weakened competitiveness globally when complying with tighter regulations on domestic carbon emissions.

Carbon regulations are likely to become stricter in nations where POSCO operates and sells its products.

Enactment of the government’s tougher carbon restrictions will reduce people’s incomes and curtail steel output.

The possibility that society will impose greater responsibility on companies that generate the most GHG.

PS

S

BS

S

S

RISK

POSCO can lead the market by developing and supplying energy-efficient steel

- Transportation: Tightened standards on vehicular weight and fuel mileage are driving demand for high-performance steel.

- Power generation & renewable energy: supply essential materials for these industries.

Demand for steel products is likely to rise because steel is easy to recycle.

Participate in new growth areas such as green businesses and new & renewable energy.

Differentiate corporate competitiveness by developing breakthrough technologies.

Heightened stakeholder awareness from positive external assessments and transparent data disclosure.

S

B

BS

Pl

BS

OPPORTUnITy

InTRO > GREEN

STEEL > GREEN BUSIN


PARTNERSHIP

10

2010 CARBON REPORT

10 POSCO introduced the outside director system in 1997. Since then, we have worked continuously to install an advanced corporate governance system that maintains balance and independence between the Board of Directors and the professional management as well as protects shareholder interests. Recently, our efforts have been focused on sustainable development management. As a part of such efforts, we established processes for quick decision making on climate change issues by the general shareholder’s meeting, the Board of Directors (BOD) and the CEO, which are the three main pillars for corporate governance. The BOD consists of eight outside and five inside directors, and six committees are run under the Board’s direction. All of these committees except for the Management Committee are chaired by outside directors, guaranteeing independence in making decisions. The Management Committee, which is made up of the five inside directors, deliberates and decides on investment plans and enterprise-level mid-/long-term management strategies. The Committee’s agenda includes mid-term strategies for environment and energy, which have emerged as key management factors. Such strategies are devised by the separate Environment and Energy Committee.

The CEO chairs the monthly Enterprise Management Meeting and Executives’ Meeting, which convenes monthly and extraordinarily when necessary, to discuss such key corporate issues as response to climate change. Since March 2010, the status and analysis of POSCO’s energy consumption and GHG emissions have been reported to the Enterprise Management Meeting. At the June and December Executives’ Meetings, future directions for carbon management as well as the carbon reduction roadmap were discussed. Shareholders who attended the General Shareholders’ Meeting on February 26, 2010, and participants in the CEO forums, which were held on January 14 (domestic) and on January 19 (overseas), were informed of POSCO’s major management decisions, including response to climate change.

GOVERNANCE

Organizations for Climate Change Response

Board of Directors CeO General Shareholders’ Meeting

8 outside directors, 5 inside directors and 6 committees

Questions and answers about climate change responses

Subcommittees 3

environment & energy Committee (abolished in 2011)

Chair: Environment & Energy Planning Department chiefMeeting frequency: once a yearFunction: establish mid-term management strategies regarding environment and energy issues- Climate change response strategies- Roadmap for GHG emission reduction technology, etc.

Function: discuss and implement major agenda items in their respective fields of responsibility,Meeting frequency: at least twice a year

Director Nominating Committee

General Shareholders’ Meeting (annually)

Carbon-lean Steel Technology Subcommittee

Climate Change Response Subcommittee

Renewable energy Subcommittee

CeO Forum (once a year inside Korea and once a year outside Korea)evaluation & Compensation Committee

Finance & Administration Committee

Audit Committee

Internal Transactions Committee

Management Committee

Members: five inside directorsMeeting frequency: whenever issues arise that requires attentionAgenda for deliberation and resolution:investment plans and enterprise-wide mid-term manage-ment strategies

Chair: the CEOMeeting frequency: once a yearFunction: approve Family-wide climate change response goals and strategies

POSCO Family environmental Management Committee (established in 2011)

The committee members include senior officials from POSCO-invested companies and institutions (Daewoo International, POSCO E&C, POSCO Specialty Steel, POSCO Power, POSCO ICT, POSCO P&S, POSCO Chemtec, POSCO Plantec, POSTECH, RIST and POSRI)

Chair: the CEOMeeting frequency: twice a yearFunction: deliberate on key issues regarding green growthDiscuss and adjust tasks between subcommittees

POSCO Family Green Growth Committee

Report on enterprise-wide energy use and GHG emissions status and discuss reduction measures

enterprise Management Meeting (monthly)

Deliberate on investment plans in environment and energy-related projects

The Meeting of executive Officers (monthly)

Meetings chaired by the CeO

Meetings regarding climate change response

InTRO > GREEN

STEEL > GREEN BUSIN


PARTNERSHIP

1111Representatives from POSCO invested companies and institutions jointly participate in the POSCO Family Green Growth Committee, which was launched on July 7, 2009. The Committee is chaired by the POSCO CEO and consists of three subcommittees, respectively tasked with developing carbon-lean steel technology, responding to climate change, and seeking renewable energy and other new business opportunities. Regular meetings are scheduled 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, 2009, to review and finalize the POSCO Family Green Growth Master Plan. The third and fourth meetings were held on July 23 and December 27, respectively, to strengthen cooperation with POSCO-invested organizations. Participants in those meetings reviewed the progress of the master plan, discussed POSCO’s responses to GHG emission regulations at home and abroad, and shared ideas about creating synergy for green businesses among POSCO Family companies. In addition, a cooperative network has been established among POSCO, POSLAB, RIST, POSTECH and POSRI to research technologies for reducing GHG emissions and studying related policies.

POSCO, POSCO-invested companies and outsourcing partners declared the POSCO Family Global Environmental Management Directives on December 27, 2010. The declaration was a part of efforts to build a Family-wide integrated environmental management system that allows all Family organizations to deal with environmental risks, going beyond the original system, which was limited in scope to the steelmaking industry. POSCO and its invested companies recognize that the environment is a key factor in management strategies. “Building an integrated environmental management system,” managing environmental risks” and “promoting open communications” have become the three main pillars in POSCO’s global environmental management.

In 2011, the Environment & Energy Committee is being upgraded and re-launched as the POSCO Family Environmental Management Committee, which will be chaired by the CEO. The new Committee will deliberate on and approve environmental management strategies and its members will share information, performance and best practices of environmental management, strengthening communications between POSCO-invested companies, suppliers and outsourcing partners with regard to environmental management. In addition, outsourcing partners and suppliers will voluntarily engage in the Green POSCO Certified Partner (Green PCP) certification, further advancing POSCO Family’s environmental management.

POSCO Family Green Growth Committee

POSCO Family Global Environmental Management declaration and POSCO Family Environmental Management Committee

Build a Family-wide environmental management system based on ISO14001 and secure global leadership.

Comply with environmental regulations and continue to improve the entire processes in consideration of the environment.

Minimize the discharge of contaminants by adopting cleaner production methods and implementing best available control technologies.

Capitalize on natural resources and byproducts efficiently to establish a resource-circulating society and improve ecological efficiency.

Lead low-carbon green growth by using cleaner energy sources and implementing green technology.

Disclose our environmental management performance to secure management transparency and sustainability.

POSCO Family Environmental Policy (revised in Dec. 2010)

The POSCO Family recognizes the environment as a key factor in management strategies and secures environmental soundness by developing new technologies and engaging in regular communication with stakeholders, therefore contributing to low-carbon green growth. To this end, members of the POSCO Family must observe the following directions.

InTRO > GREEN

STEEL > GREEN BUSIN


PARTNERSHIP

12

2010 CARBON REPORT

12 POSCO has established Vision 2020, which calls for the cultivation of new business lines inside as well as outside the steelmaking industry. The goal is to have the POSCO Family of companies achieve combined annual sales of KRW 200 trillion within the next ten years, ensuring sustainability and excellent corporate soundness.

Thus, the business model will evolve, from an organizational structure primarily centered on steelmaking to a Group-wide platform for multifaceted growth going forward. The way of doing business is being radically changed, too, from one led by POSCO alone to a POSCO Family management system that generates synergy.

POSCO is establishing the platform for future growth by bolstering green businesses. A strategic carbon management program is being followed to reach the goal of being a global leader in green growth. Our reduction of energy use and development of breakthrough technologies are improving the competitiveness of steel in the marketplace. We will increase our market position by developing and popularizing new grades of energy-efficiency steel and expanding our line of non-steel materials. Meanwhile, the POSCO Family as a whole is pursuing new and renewable energy sources such as fuel cells for power generation, wind power and refuse-derived fuel, and we are finding new growth drivers in the green business areas. These combine initiatives will provide us with new momentum for reaching our ambitious Vision 2020 goal.

In 2010, we launched our first project of integrated steelworks construction at an overseas location. Meanwhile, we have recognized the need to expand green management practices to worksites outside Korea. In December 2010 we announced the POSCO Family Global Environment Management program, taking the POSCO-centered environmental management activities to the next level.

Furthermore, the low-carbon, green management program does not stop at the workplace; employees are adopting low-carbon, green lifestyles when off the job as well, helping to improve habits in society at large. We are also strengthening our partnerships inside and outside Korea to earn the trust of stakeholders the world over and establish leadership in the fight against global climate change.

Vision & Strategies

VISION · STRATEGY · TARGET

Low-carbon, Green Growth Vision for the POSCO Family

Green Steel Green BuSineSS Green life Green PartnerShiP

Make breakthroughs in steelmaking processes

Develop high-strength steel sheet and ultra-light steel products

Focus POSCO Family competencies on green busi-nesses such as new & renewable energy

Carbon-neutral Program, Green Walk Campaign, Green Workplace

Engage in climate change policy cooperation including Asia Pacific Partnership on Clean Development and Climate, adopt green technology

Invest KRW 7 trillion by 2018 in low-carbon steel and green businesses; create 87,000 jobs in the green industries

InTRO > GREEN

STEEL > GREEN BUSIN


PARTNERSHIP

GlObAl GREEn GROWTh lEAdERReduce by 9% the amount of CO2 emitted per ton of steel produced by 2020 with reference to the levels recorded in the past 3 years. Reduce GHG emissions in society by 14 million tons a year (by promoting the use of high-efficiency steel and developing green businesses)

1313POSCO announced its voluntary GHG reduction target by 2020 at the 7th Green Growth Committee meeting chaired by the President of the Republic of Korea in February 2010. Between 2007 and 2009, 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 within ten years. To this end, the company will invest KRW 1.5 trillion by 2018 to reduce the amount of coal used in steel production, improve energy efficiency, and develop CO2 breakthrough technologies.

Meanwhile, POSCO will produce energy-efficiency steel products and turn byproducts from steelmaking into usable resources. We will continue to develop high-strength steel sheet that reduces vehicular weight and thereby improves fuel efficiency, as well as higher grades of electrical steel sheet that increases the energy efficiency of electric motors and transformers. Greater quantities of our blast furnace slag will be used in the production of environment-friendlier cement.

POSCO and POSCO-invested companies will invest a combined KRW 5.5 trillion in new green growth businesses by 2020, reducing approximately 14 million tons of overall CO2 emissions a year in society. 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 grids for energy-intensive industrial facilities such as steelworks, and create new ways to convert solid waste into energy.

POSCO's Voluntary Reduction Target by 2020

• POSCO referred to the IPCC Guidelines for National Greenhouse Gas Inventories, WBCSD/WRI Greenhouse Gas Protocol, World Steel Association Guidelines and ISO TC 17/SC draft Calculation Method for CO2 Emission Intensity from Iron and Steel Production (August 27, 2010) 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.

• The recorded CO2 emission volumes are for company GHG reporting guidelines. The calculated values may vary with the Guidelines for GHG & Energy Target Management scheme announced in March 2011 with regard to the government’s carbon regulations.

• The coal emission factor is a 2006 standard; a unified figure is used from 2007 onward.

InTRO > GREEN

STEEL > GREEN BUSIN


PARTNERSHIP

POSCO's Target for Reducing CO2 Intensity

(Unit: t-CO2/t-S)

2007-2009

Base Year

2010

Performance

2015

Target

2020

Target

Reduction with breakthrough technologies

Reduction with currently available technologies-3%-6%

2.18

1.98

2.112.13

Carbon dioxide constitutes most of the greenhouse gas emissions generated at the POSCO Pohang Works and Gwangyang Works. The combined CO2 emission volume was 71.7 million tons in 2010, up from the 63.2 million figure posted the year before. The increase is primarily due to a 14.2 percent rise in crude steel output, from 29.5 million tons in 2009 to 33.7 million a year later, fueled by greater demand for steel in the marketplace. On the other hand, higher energy efficiency kept the increase in CO2 emissions to just 13.6 percent. Carbon dioxide intensity per ton of crude steel produced will indirectly indicate how much energy efficiency has improved. It was 2.14 t-CO2/t-S in 2009 and 2.13 t-CO2/t-S in 2010. This slight reduction year on year is attributable to improved processes at the Pohang Works and better energy efficiency from the high-mill process at the Gwangyang Works.

14

2010 CARBON REPORT

14

• Calculated by referencing the WBCSD/WRI Greenhouse Gas Protocol

• The total weight of the purchased coal was 80.96 million tons, which is reflected in the calculation of "other CO2 emissions."

• The total number of employees stands at 16,898 as of the end of 2010.

Direct emissions: Scope 1 Indirect emissions: Scope 2 Total emission intensity

GhG Emissions from Iron & Steelmaking Processes

CO2 Intensity

(unit: t-CO2/t-S)

The CO2 generated while transporting purchased 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 in 2010 are as follows:

Other GhG Emissions

(Unit: t-CO2)

Other GHG Emissions

992,076 1,5104,134Transport of purchased raw materials Employee commuting Business travel

scope 3

2008

2009

2010

2.20

2.14

2.13

PERFORMANCE

2.13

2.05

2.04

- 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

0.07

0.09

0.09

InTRO > GREEN

STEEL > GREEN BUSIN


PARTNERSHIP

Carbon accounting is a process for calculating the costs and benefits, in monetary units, of carbon management activities. The results are then specified by product and process to provide decision makers and stakeholder with relevant information. Conventional accounting methods treat most of the costs incurred by carbon management activities as overhead costs, making difficult an accurate analysis of the company’s carbon reduction efforts and results therefrom. Thus, we recognize the limitation of conventional accounting for providing data to support the decision-making of top management. POSCO and POSRI are now jointly working on the adoption of a carbon accounting system as a form of managerial accounting that can improve carbon management competencies, taking advantage of ongoing improvements in CO2 efficiency.

The amount of equipment investment (for projects launched in 2010 or before and completed in 2010) is KRW 80.3 billion, and these projects include building new heat recovery steam generators, installing high efficiency inverters, and reinforcing systems to raise heat efficiency during processes inside the steelworks. The investment total also includes KRW 1.7 billion to install a system to control the natural lighting and to replace conventional lights with high-efficiency types. The R&D projects launched in 2010 to find new ways to reduce greenhouse gas emissions represent a total investment of KRW 27.8 billion.

1515 High-strength steel sheet can be used to lighten vehicles and therefore improve fuel efficiency. Low-core-loss electrical steel sheet can increase the energy efficiency of electric motors and transformers. The expanded use of these “energy-efficiency” steel products is estimated to have decreased CO2 emissions in general society by around 2.5 million tons in 2010. Granulated blast furnace slag, a byproduct generated during steel production, was used as an environment-friendlier ingredient for cement, lowering CO2 emissions in society by an additional 4.88 million tons or so.

GhG Reduction from Energy-efficiency Steel & byproduct Usage

GHG Reduction Effect in Society

High-strength steel Low-core-loss Granulated blast sheet for automobiles magnetic steel furnace slag

CO2 reduction in society 502

2,047

4,875 (thousands of t-CO2/yr)

Sales volume 623

356

6,170

(thousands of tons)

Carbon Accounting

InTRO > GREEN

STEEL > GREEN BUSIN


PARTNERSHIP

Roadmap for Establishing Carbon Accounting Guidelines

1 2 3 4Phase Phase Phase Phase

Carbon reduction activitiesAnalyze data & Categorize

Study classification accounts & calculation methods regarding the costs & benefits of carbon reduction activities

Create a carbon accounting system and strategic decision-making models

Complete guidelines for assessing carbon management performance

We are ushering in a greener world led by steel

We are accelerating the development of our own innovative technologies in an effort to find growth

opportunities in green businesses. At the same time, efforts are ongoing to raise energy efficiency

improvement and ensure the GhG management system is highly successful. We are developing unique

products and technologies by applying firm resolve and exacting standards. In the process, POSCO is

advancing as a true frontrunner in the world market.

Green SteelenerGy effiCienCy imPrOvement

CO2 BreakthrOuGh teChnOlOGy DevelOPment

CarBOn manaGement SyStem

enerGy-effiCienCy Steel

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2010 CARBON REPORT

EnERGy EFFICIEnCy IMPROVEMEnT

● 1st Stage: 1999~2008POSCO made a voluntary agreement with the government to improve energy efficiency, and it was implemented in two phases, from 1999 to 2008. Over that ten-year period, a total of KRW 1.43 trillion was invested in energy-related facilities and 2,100 projects were carried out. These included the construction of a combined-cycle power plant fueled by the by-product gas from the Finex* plant, waste heat recovery systems, and coke dry quenching (CDQ) facilities. As a result, installation of waste heat recovery facilities is now 97% complete, conserving 2.91 million tons oil equivalent (TOE) per year. In addition, we have built an integrated energy data system that takes advantage of our energy-saving operation techniques. The system disseminates ideas and diagnostic methodology for energy management and shares the results organization-wide.

● 2nd Stage: 2009~2015Most of investment projects for large-scale heat recovery facilities were completed by 2008. The following year, therefore, we began to identify and invest in additional small and medium-sized projects for improving energy efficiency through the application of convergence technologies. We installed a heat recovery steam generator (HRSG) in our new No. 3 Steel Mill at the Gwangyang Works in 2010. CDQ facilities and HRSGs are currently under construction inside the No. 5 Coke Plant and No. 5 Sinter Plant at Gwangyang, with completion scheduled for the first half of 2011.Meanwhile, two combined-cycle power plants have been completed with investment from the operator, POSCO Power. These plants collect the surplus blast furnace gas generated after the production capacity expansion at the Gwangyang Works.

Small and medium-sized projects are also being carried out to raise energy efficiency. Starting 2009, inverter technology has been applied to all the high-voltage motors used on the premises. These activities enabled us to save 313,000 TOE of energy in 2010. Furthermore, a “smart industry” pilot project, which integrates information technologies with steelmaking technologies, was launched at the Gwangyang Works oxygen plant in 2010.

● 3rd Stage: 2016~2020We recognize that applying currently available technologies will have limited results in making further improvements to energy efficiency, and efforts have been stepped up to develop additional breakthnough technologies that are expected to be commercialized by 2020. These include reheating furnaces that use pure oxygen, recovery of sensible heat from molten slag, and closed

system for recovering waste heat from sinter.

Roadmap for Raising Energy Efficiency

POSCO has striven to reduce GHG emissions on multiple fronts by improving energy efficiency over the last 10 years. We have continued to invest in facilities that recover waste heat from steelmaking processes, which are energy intensive. Our efforts to lower emissions though enhanced energy efficiency include broader application of energy-efficiency technologies in workplaces as well. The energy-saving operational methods that we have acquired over the years are being increasingly shared and applied among the various worksites to raise energy efficiency and reduce GHG emissions.

POSCO’s Roadmap for Energy Efficiency Improvement

Investment in energy efficiency facilities: KRW 1.43 trillion

- Commercialize unique innovative technologies to take energy efficiency to the next level

3rd Stage: 2016~2020

- Invest in small & medium-sized projects for improving energy efficiency

- Create “smart industry” technologies

2nd Stage: 2009~2015

- Invest in large-scale heat recovery facilities

- Amass energy-saving operation methods

Estimated additional investment: KRW 750 billion (2010~2020)

1st Stage: 1999~2008

SMART InDuSTRy

Energy Control

Production control

Sales

Water,Gas/Oil

Factory

electricity

Process-A

Product

ion da

ta Production dataOrder receipt

Process-B

(electricity, heat, gas, water)

Current load

Optim

al e

nerg

y-us

e pa

ttern

s

* The Finex process is an innovative, next-generation iron-making technology. Molten iron is produced directly using iron ore fines and non-coking coal rather than processing through sintering and coke making.

● USe OF BY-PRODUCT GASMost of the coke oven gas (COG), blast furnace gas (BFG), Linz-Donawitz converter gas (LDG), and Finex off-gas (FOG), which are generated during iron-making and steelmaking processes, are recovered and used as energy to generate steam or electricity. On-site LNG combined-cycle power plants, byproduct-gas-fired generators and heat recovery systems such as coke dry quenching facilities and top gas pressure recovery turbines (TRT) supplied about 70 percent of the electricity used at the Pohang Works and Gwangyang Works during 2010.

● SMART INDUSTRYIn 2010, we applied smart grid technology to our oxygen plant at the Gwangyang Works as a “smart industry” pilot project, and on-site applications of the smart grid will continue to be expanded in the future.

The smart grid is an advanced electricity transmission and distribution network that utilizes digital information and control technology to maximize energy efficiency through interactive,

real-time communication between the provider and consumers. POSCO has the optimal conditions for demonstrating the effectiveness of the smart grid because each steelworks has its own instrumentation, network, receiving and distribution system, power plants and alternative energy sources.

● BFG IN COMBINeD-CYCle POWeR GeNeRATIONPOSCO Power, a power plant operator, invested in the construction of two combined-cycle power plants at the Gwangyang Works to recover the surplus BFG being generated after output capacity was expanded. The first was completed in August 2010, and the second was operational in December of that year.

On the one hand, combined-cycle generation boasts higher energy efficiency, while on the other hand meeting its fuel requirements is difficult. Therefore, blast furnace gas, which has low calorific value, has been considered inappropriate to be used as a fuel for combined-cycle power generation. POSCO solved this problem problem by developing the technology necessary to blend BFG with coke oven gas, which is richer and thereby enables combustion to be sustained.

● 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 problems with insulation, 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.

● eNeRGY SAvING IN eleCTRICAl ROOM lIGHTINGPOSCO has adopted a new method of conserving energy consumed by interior lighting. An “intelligent” system has been developed with sensors that detect the presence of people. When workers are not present, illumination intensity is lowered automatically. The automated system has been installed in more than 960 control rooms at the Pohang and Gwangyang Works, cutting energy use for lighting by some 92 percent.

In addition, natural lighting windows and the related lighting circuit system, used as an alternative to artificial lighting, have been installed at three locations, including the hot rolling mill at the Gwangyang Works. This energy-saving system will also be installed at the Pohang Works iron-making plant and ten other locations during 2011. These natural lighting systems are expected to save some 16MWh of electricity per year.

● eNeRGY CONSUMPTIONThe amount of energy consumed in 2010 is estimated by source as follows:

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STEEl > GREEN BUSIN


PARTNERSHIP

Energy-saving Activities

Interior illumination, which was 80 lux prior to

installing the natural lighting windows was increased

to 500 lux after installation (during daylight hours).

Coal Heavy Oil LNG Electricity

24 Mt 2.4 ML 743 MNm3 6,989 GWh

InSTALLATIOn OF nATuRAL LIGHTInG WInDOWS

SMART InDuSTRy

Energy Control

Production control

Sales

Water,Gas/Oil

Factory

electricity

Process-A

Product

ion da

ta Production dataOrder receipt

Process-B

(electricity, heat, gas, water)

Current load

Optim

al e

nerg

y-us

e pa

ttern

s

20

2010 CARBON REPORT

POSCO is currently working on a process that uses ammonia to absorb and separate CO2 from the blast furnace gas generated during steelmaking processes. Medium and low temperature waste heat generated at the steelworks serve as the energy needed to reclaim the CO2, making possible the carbon dioxide separation at low cost. An R&D project for this new technology was launched in 2006, and the first pilot plant with a processing capacity of 50 Nm3/hr started up in December 2008. It has attained a CO2 capture efficiency of over 90 percent and CO2 purity of 95 percent or more. The second demo-plant (capacity of 1,000 Nm3/hr) began operation in 2010. In a few years, the second plant is expected to capture about ten tons of CO2 a day.

The temperature of red-hot sintered ore is about 550˚C. In 2007, POSCO began work on a sealed heat exchanger that will be able to increase the heat recovery rate and recovery temperature from sintered ore to at least 70 percent. In 2010, an experiment of the exchanger was conducted to process one ton of sintered ore per hour, and a 10-ton/hr test is scheduled to begin in 2011.

bREAKThROUGhTEChnOlOGydEVElOPMEnT

POSCO is committed to developing new technologies that can help to reduce CO2 emissions significantly. These technologies include separation of CO2 from blast furnace gas and recovery of heat generated during steelmaking processes to raise energy efficiency. Our ultimate goal is to develop and implement a next-generation steelmaking method that operates without coal and emits no CO2.

Technology for Capture of CO2 from Steelmakingby-product Gas

Sintered Ore heat Recovery

Direction of technology development

1stRoute

2ndRoute

3rdRoute

Experimental sealed heat exchanger (1 ton/hr)

INTRO > GREEn

STEEl > GREEN BUSIN


PARTNERSHIP

Hydrogen steelmakingCO2 separation and capturelow-carbon steelmaking technology

21

High-temperature slag (at least 1,400˚C) is a byproduct of iron- and steelmaking. It is either rapidly cooled by water and used as a cement substitute or slowly cooled in air and used as roadbed materials. In addition, POSCO has been involved in a project to develop technology that recovers slag heat to raise the energy efficiency of steelmaking and to reduce CO2 emissions since 2009. The development of a unique slag heat recovery prototype has been completed, and a field test is being prepared.

Flue gas discharged from reheating furnace stacks contains medium/low-temperature heat streams (under 300˚C). However, recovering the waste heat has long been considered difficult for technical and economic reasons. POSCO developed a stack heat recovery system that utilizes thermal siphon effect to reclaim heat energy from stacks and generate power. Construction of a pilot plant began in 2010.

POSCO is currently developing steelmaking technologies that use hydrogen as reducing agent instead of coal and take advantage of mass-produced clean hydrogen in the future. A short-term objective is to develop a technology that captures hydrogen in by-product gases from steelmaking and uses it for reducing iron. Over the mid-/long term, the company is working on hydrogen

reduction steelmaking technology that uses massive high-density hydrogen in the future.

Slag heat Recovery

Power Generation by Recovering Waste heat from Smokestacks

hydrogen Steelmaking

Stack Heat Recovery Pilot Plant at Laboratory and Diagram

Hydrogen Steelmaking Process (by 2050)

Finex fluidized reduction furnaceLarge electric arc furnace

Fe2O3+3H2 2Fe+3H2OPower supply

Hydrogen Heating

H2 holder

Iron ore fines

Reduced iron

Hot charge rolling

Mass-produced

clean hydrogen

Flue gas discharge

Warm water injectionHeating

Flue gasPump

Cooling Heat recovery

Generator

Turbine

low-carbon electricity

INTRO > GREEn

STEEl > GREEN BUSIN


PARTNERSHIP

Oil-water separator

Medium/low-temperature heat stream (flue gas)

22

2010 CARBON REPORT

● GHG Management SystemPOSCO has developed in-house guidelines for calculating GHG volumes based the internationally-used IPCC* Guidelines for National Greenhouse Gas Inventories, WBCSD**/WRI*** Greenhouse Gas Protocols, World Steel Association Guidelines and ISO TC17. These guidelines have been used since 2006 to construct a GHG management system. The calculated amounts of GHG emissions include the figures for the Pohang Works, Gwangyang Works, Pohang Head Office, Gwangyang Office, and Research Center. The CO2 emissions for steel production processes are calculated on the basis of the raw materials with carbon content used, the amount of electricity purchased from outside, and the volumes of products and byproducts that are sold each year. The CO2 intensity per ton of crude steel is managed as a key performance index (KPI), with performance reports submitted at regular company meetings chaired by the CEO. Moreover, assessment results on changes in GHG emissions represent a major variable that influences decisions on new facility investments and process alterations.

● ISO 50001 energy Management SystemThe ISO 50001 energy management system is the subject of heated international debate, so POSCO participates in discussions on the topic with outside organizations while deliberating internally on whether to adopt the system. WE have also participated in a energy management system pilot project sponsored by Korea Energy Management Corp. (KEMCO) since 2008.

● Internal Reward Program for GHG ReductionAn incentive program has been devised for those in production units who achieve reductions in GHG emissions through their energy efficiency improvement activities. Fifteen production units participated in the test program at the Pohang and Gwangyang Works during November and December 2010, and it is to be expanded to most of the production units in January 2011. To facilitate program operation, a system has been developed whereby the results of actual performance against GHG reduction targets can be checked online for each unit and production activity on a daily basis.

Workshop for GHG Managers, Dec. 2010

CARbOn MAnAGEMEnT SySTEM

Carbon Management System

1Phase

2Phase

3Phase

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

INTRO > GREEn

STEEl > GREEN BUSIN


PARTNERSHIP

POSCO manages greenhouse gases and energy in an integrated way to lower GHG emissions on the one and reduce the use of fuel and electricity on the other. In this process, we analyze, evaluate and adopt the most effective methods for reducing our carbon footprint. The data are then linked to the costs of GHG emissions and disposal for potential new businesses and production processes, providing a substantial platform that can be reflected in decision-making. In the future, this carbon management system will also be adopted at our overseas operations as well as at other member companies of the POSCO Family.

Strategy ManagementProject ManagementInventory Management

Calculate GHG emissions at the steelworks

Assess the performance of reduction efforts, which are linked with inventories

Use as a decision-making tool in light of reduction potential and economic benefit

23Reducing the weight of an automobile is one of the most effective ways to improve fuel mileage and lower GHG emissions. Figures vary by vehicular type, but a 10 percent reduction in the overall weight will normally cut is CO2 emissions by 5-8 percent. 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. The energy efficiency of the automobile is improved as a result.

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.

Magnetic steel plate is used in generators, power transformers and electric motors, and the growing need for clean energy is driving demand for this specialty steel product. Magnetic steel can be classified into two main types: grain-oriented and non-oriented. High-grade Magnetic steel plate has a higher orientation in the rolling direction than regular 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. POSCO supplied 365,000 tons of high-grade magnetic steel plate in 2010.

EnERGy-EFFICIEnCy STEEl

Automotive high-strengthSteel Sheet

high-grade Magnetic Steel Plate

* “Automotive high-strength steel” refers to High-Strength Steel (HSS), with a tensile strength of at least 590MPa, as well as to Advanced High-Strength Steel (AHSS), with a tensile strength of 440MPa or more.

** Distance traveled in one year by a passenger vehicle. (National Transportation Safety Board, 2006)

Reduction of CO2 emissions in society from automotive high-strength steel

2008 2009 2010

CO2 reduction throughout the product lifecycle 2,624 2,876 5,020

CO2 reduction per annum 262 288 502

Sales volume (thousands of tons) 328 357 623

(thousands of tons)

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).

CO2 reduction effect from using high quality grain-oriented magnetic steel*

2008 2009 2010

CO2 reduction throughout the product lifecycle** 4,656 5,463 5,560

CO2 reduction per annum 155 182 185


(thousands of tons)

* ”High-grade grain-oriented magnetic steel” refers to steel sheet with an iron loss of 1.05 W/kg or lower.** CO2 reduction throughout the final product (a transformer) lifecycle, assuming 30 years of use.

CO2 reduction effect from using high quality non-oriented magnetic steel*

2008 2009 2010

CO2 reduction throughout the product lifecycle** 27,680 24,544 33,507

CO2 reduction per annum 1,538 1,364 1,861


(thousands of tons)

* “High-grade non-oriented magnetic steel” refers to steel sheets with an iron loss of 4.70 W/kg or lower.** CO2 reduction throughout the final product (a motor) lifecycle, assuming 30 years of use.

INTRO > GREEn

STEEl > GREEN BUSIN


PARTNERSHIP

POSCO’s R&D effort is finding ways to reduce GHG emissions during production processes as well as to come up with new steel products that are friendlier to the environment by lowering GHG emissions throughout society. New types of high-strength steel sheet for automobiles and high-grade magnetic steel plate are being developed and supplied in increasing volumes

We envision a future POSCO driven by green growth.

We consider green businesses as new growth engines for us. As such we are growing POSCO into a maker

of diverse materials to meet the demands of the low-carbon, green growth era. Our portfolio is now

being expanded from iron and steel products to include non-steel products, new materials, and steel

substitutes. We are developing energy-efficiency steel products, supplying eco-friendlier slag cement,

and advancing into new & renewable energy. Moreover, our participation in the carbon market supports

the advancement of our green businesses

Green business eCO-frienDly SlaG Cement

CarBOn market

DevelOPinG renewaBle enerGy with POSCO family

Honam High Speed Railway

The Honam High Speed Railway (Honam HSR) between Osong and Mokpo is under construction. The 231km line,

which is scheduled to be finished by 2017, will promote the balanced development of Chungcheong and Jeolla Provinces.

Expert advice was taken to select the type of cement used for the project. As a result, low heat cement containing slag

powder was chosen for enhanced durability and better salt damage resistance. As of the end of 2010, the project was 14

percent completed, and by the end, an estimated 360,000 tons of low heat cement will be used in 17 of the 19 sections

of track.

The Geoga Bridge

The Geoga Bridge, which opened in December 2010, is an 8.2km bridge-tunnel fixed link that connects the Korean city of

Busan to Geoje Island. This fixed link consists of cable-stayed bridges over the water and an undersea tunnel. The tunnel

is the world’s deepest immersed roadway tunnel (48 meters below mean water level). Slag cement was blended with the

high-strength concrete applied to both the immersed tunnel and bridges, which are exposed to sea water.

26

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PARTNERSHIP

ECO-FRIEndly SlAG CEMEnT

* Clinker is an intermediate cement product made by sintering limestone and other raw materials. Clinker is crushed fine to make Portland cement

** Slag powder: ground granulated blast furnace slag*** Slag cement: a mixture of Portland cement and a specific proportion of slag powder

Portland cement

Slag cement***

Raw material crusherRaw materials such as limestone and silica

Clinker

Calcination

CaCO3+Heat CaO+CO2

Gypsum, Granulated blast furnace slag

Blend

Slag powder **

Granulated blast furnace slagBlast furnace

0.79 tons of CO2 per 1 ton of clinker

Crusher

Crusher

CO2 emissions

Blast furnace slag, a by-product of iron-making, can be used as a clinker* substitute, saving mineral resources such as limestone needed in clinker production and lowering CO2 emissions. Therefore, Portland cement contains about five percent of blast furnace slag as an additive. Moreover, slag cement, a mixture of ground granulated blast furnace slag and Portland cement, reduces hydration heat in concrete and has stronger salt scaling resistance. Therefore, slag cement is now used as an ingredient in the manufacture of mass concrete and marine concrete. In 2010, some 6.17 million tons of blast furnace slag from POSCO were used as substitutes for cement materials, lowering CO2 emissions in society by an estimated 4.88 million tons.

Electricity Fuel

CO2 emission reduction effect

2010 CARBON REPORT

All blast furnace slag and steelmaking slag are reused as cement materials or aggregate substitutes. Liquid slag from furnaces is granulated when it is cooled rapidly with water. This granulated blast furnace slag is used as a cement material. More than 80 percent of blast furnace slag at POSCO is produced as granulated blast furnace slag.

Cement Production Process

POSCO has been involved in the GHG registry, organized by the Korea Energy Management Corp., since 2005. In 2010, the company acquired 719,050 tons of Korea certified emission reductions (KCERs) through seven GHG reduction projects. The Korean government purchased 423,565 tons of KCERs at a rate of KRW 5,194 per ton, and the unsold KCERs were recognized as an earlier action for reduction of greenhouse gases by the Framework Act on Low Carbon, Green Growth. Such recognition will act as an incentive in various climate change-related policies implemented by the government in the future.

POSCO carries out clean development mechanism (CDM) projects to respond proactively to the implementation of the United Nations Framework Convention on Climate Change and to expand the green energy business. Once POSCO’s investment in GHG emission reduction facilities is accredited as a CDM project by the United Nations, POSCO acquires the amount of CO2 that would otherwise be emitted to the atmosphere as carbon credits (CERs).

The small hydroelectric power plant at the Gwangyang Works was registered as a CDM project by the UNFCCC in July 2008, securing 26,000 tons of CERs over the next 10 years. POSCO is now partnered with Nippon Steel to perform a rotary hearth furnace project at the Gwangyang Works under the CDM framework. In addition, the company carries out a forestation project in the East-Central region of Uruguay. The first stage of the project was finished with the tree-planting of 1,000ha in 2009 and 2010. In December 2010, the project was registered as Korea’s first afforestration CDM. POSCO is now buying land to proceed with the second stage. Once the second phase is completed, 206,000 tons of CERs will be obtained over the next 30 years.

POSCO is participating in carbon funds inside and outside Korea. The company has participated in funds that invest in low-priced carbon credits, CDM projects and green growth businesses to acquire CERs at relatively low rates or to earn profits. As of the end of 2010, carbon funds that POSCO is involved in include: the Future Carbon Fund, which buys low-priced carbon credits by investing in renewable energy projects and other green businesses in Asian developing countries; the Asia Clean Energy Fund, which invests in clean energy businesses in emerging Asia; and the Carbon Emission Fund, organized by the Korean Ministry of Knowledge Economy.

27

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PARTNERSHIP

CARbOn MARKET

GhG Registry

CdM Projects

Carbon Funds

2010 Government-certified GHG Reduction Performance

Projects CO2 Reduction

Installation of combined-cycle power plant using by-product gas from the Finex process at the Pohang Works 114

Installation of combined-cycle power plant fired by surplus by-product gas at Gwangyang Works 274

Electricity generation from the waste heat of coke at Gwangyang Works CDQ Units 3 & 4 291

Switch from bunker-C to LNG as auxiliary fuel for the Gwangyang Works HRSG 3

Installation of a 1MW solar power plant at the Gwangyang Works 1

Electricity use reduction by installing energy-saving devices in air ventilation system at the Gwangyang Works 14

Electricity generation from installing blast furnace TRT at the Gwangyang Works 22

(thousands of tons)

POSCO is participating in various GHG emission reduction projects at home and abroad to hone responsiveness to diverse climate change issues. These efforts are expected to provide a way to enter the carbon trade market in the future.

28

2010 CARBON REPORT

REnEWAblE EnERGy dEVElOPMEnT WITh POSCO FAMIly

● SOlAR POWeR PlANTPOSCO Plantec installed 1MW-class rooftop solar power generators at the Pohang Works. Since then, the company has provided solar power generators in 17 projects with combined capacity of over 20MW. In September 2010, a groundbreaking ceremony for a solar photovoltaic power plant was held in Sicily. POSCO Plantec is constructing three power plants of combined capacity of 5.5MW at the same time in Sicily and Abruzzo, Italy.

POSCO Power secured concession for a 300-megawatt solar facility project in Boulder City, Nevada (USA), in partnership with a California-based developer of renewable energy projects. The Boulder Project is the largest solar PV power unit in the world and a joint venture between the two companies will take charge of the plant construction, which is scheduled to be completed by 2014. The plant when fully operational will power almost 60,000 homes for 20 years.

● WIND TURBINeSPOSCO E&C has operated a 40MW wind farm at Mt Taegi, Gangwon Province since 2008. Annual electricity output stands at 98,300MWh, an amount needed to power 25,000 homes. Operating the wind farm is expected to reduce 60,000 tons of CO2 emissions a year.

POSCO ICT will complete the construction of a renewable energy complex, where solar PV units and wind turbines are linked to produce electricity, in Taecheon-ri, Jeolla Province, in December 2011. This is the first of its kind constructed by a private contractor. The project will add a wind farm of 9MW output capacity to the existing 24MW tracking solar PV plant. When fully operational, the complex is expected to generate over 18,000MWh of electricity annually, providing 5,000 homes with power. The figure translates into a CO2 reduction of 8,000 tons a year.

● ReFUSe-DeRIveD FUel PROJeCTRefuse-derived fuel (RDF) facilities turn 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. To carry out this project, POSCO established a dedicated company, POSCO E&E, and held Korea’s first groundbreaking ceremony for RDF process and RDF-fired power generation facilities in Busan in October 2010. Once completed, the plant will process 900 tons of MSW collected from Busan City to produce 500 tons of RDF per day excluding metallic materials. The RDF-fired power plant is capable of generating 250,000kW of power per hour. This amount of electricity can power up to 40,000 homes annually. POSCO E&E plans to expand the program beyond Busan to cities with large landfills. For example, the affiliate signed an MOU with the Pohang municipal government for another RDF and power plant project in 2008.

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POSCO is striving to turn green businesses into new growth engines. The POSCO Family is carrying out renewable energy projects to help mitigate the effects of resource depletion and global warming, while acquiring alternative energy sources in preparation for the transition from fossil fuels to hydrogen.

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● FUel CellSPOSCO Power started the construction of the fuel cell stack production facility at the industrial complex under the Youngil Bay Port Authority in Pohang in April 2010. Stacks are key components of the fuel cell. A total of KRW 70 billion was invested to build this facility, capable of annually producing fuel cell stacks representing 100MW of generation power.

Once the construction completed, POSCO Power will have the arrangements to independently produce key fuel cell products. POSCO Power has expanded investment in the development of next-generation fuel cells. The first stage was the construction of the fuel cell balance-of-plant (BOP: supporting and/or auxiliary components that are integrated into a comprehensive power system package) manufacturing facility in 2008. POSCO Power has installed 40MW fuel cell systems in 16 locations in Korea. In addition, a project to develop the 100kW fuel cell system for buildings is under way. The project will be completed by October 2011 and be ready to begin mass production.

Moreover, a research team at Pohang University of Science and Technology (POSTECH) developed an original technology for vehicle-use fuel cells. The team discovered a nano-structured polymer electrolyte that performs high hydrogen conductivity at high temperature up to 180˚C. The polymer’s production cost is lower than that of Nafion, which has been used for hydrogen fuel cells.

● SlAG MARINe FOReSTPOSCO signed an MOU with the Korean government to respond to changes in the ocean climate in 2007 and another to develop marine forests and cultivate maritime resources in 2010. Under these MOU, POSCO will develop 780ha of sea forest made of steel slag at 19 locations by 2014. The project will use the “Triton”* brand artificial reef, which helps 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, which is beneficial for ecosystems, than ordinary aggregate is. The presence of these minerals stimulates 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

발전용 연료전지공장

CO2 Fixation through Slag Mineral Carbonation and Algae Photosynthesis

6CO2+6H2O C6H12O6+6O2

C02 Fixation

CO2 fixation through carbonation (slag + flue gas CO2)

Triton sea forestation (carbonized slag + slag cement)

CO2 fixation through algae photosynthesis

CaCO3 Ca2+

Co32-

Steelmaking Slag

CO2 dissolution

Solar power generation facilities at the Pohang Works Wind farm at Mt. Taegi Facility for making fuel cells used in power plants

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* 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.

(10~20 t-CO2/ha, RIST)

We are encouraging healthier lifestyles that can help to save the planet.

low-carbon, green growth can gain greater momentum when everyone gets involved. We are putting

our heads together with people from all walks of life to discover new ways to reduce greenhouse gas

emissions in society. Our Carbon-neutral Program, Green School, Green Walk Campaign and Energy

Conservation Campaign are promoting a greener and healthier society by practicing eco-friendlier

lifestyles together.

Green lifeGreen COmmunity

Green wOrkPlaCe

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2010 CARBON REPORT

GREEn COMMUnITy

The POSCO Carbon-neutral Program identifies and supports diverse GHG emission reduction projects conducted by people throughout society. Since 2009, students from junior, middle and high schools; university societies; civic organizations and homemakers have come up with their own ideas to offset carbon emissions and competed for program sponsorship. We selected ten of the projects and provide financial assistance for up to a year. These programs encourage people to adopt a carbon-neutral lifestyle and raises public awareness of the need for GHG emission reduction. Such cooperation between the corporate sector and the general public bring us all a step closer to the goal of realizing a low-carbon, green society.

Various creative ideas were suggested for the 2010 program, targeting mainly university students. For example, participants offered suggestions on raising public awareness on and off campus as well as ways to use social networking services to promote carbon-neutral lifestyles.

POSCO Carbon-neutral Program

“Fun-Eco Factory” (Chungnam National University)Carbon-neutral Piano Stairs and Noisy Garbage Cans

The “Fun-eco Factory” team from Chungnam University installed various items that allow university students to participate in carbon neutralization easily and have a fun at the same time. They built piano keyboard stairs that sound when stepped to encourage students to use the stairs instead of taking the elevator. In addition, they created a garbage can that makes a noise when one puts something in it, reminding students to dispose of litter in the proper way.

Jihwaja (Inha University)Earthworm Bin Giveaway

Vermicomposting is composting with worms, which can turn food scraps in a bin into humus, or vermicompost. The “Jihwaja” team from Inha University hands out earthworm bins to local residents and students. Vermicomposting is an environmentally friendly way to process food scraps, contributing to carbon neutralization. It has been reported that a household can reduce its wet garbage volume by up to two thirds through the use of worm bins.

Aloe (Seoul Women’s University)Consideration for the Environment and the Elderly

Seoul Women’s University students are growing aloe on the rooftops of campus buildings. The rooftop gardens provide more greens space in the city and help to mitigate the heat island effect. Moreover, people from nearby senior welfare centers pitch in to cultivate, process and sell the produce. This is an interesting way to deal with the environmental issues and provide work opportunities elders.

Major Projects of the Second Carbon-neutral Program

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POSCO joins various social segments to engage in and support diverse GHG emission reduction activities. For example, the company sponsors university students’ carbon-neutral programs and provides junior, middle and high school students with education courses on climate change. These efforts help raise awareness on GHG emission reduction and saving energy throughout society.

Team Name University Theme

Fun-Eco Factory Chungnam University Installing equipment on stairs so that they sound like pressed piano keys when stepped on, motivating people to use stairs instead of elevators.

Jihwaja Inha University Giving away worm bins to reduce food scraps.

Engaging in various carbon-neutralization activities, including giving eco flowerpots and building a temporary recycling center.

Aloe Seoul Women’s University Creating rooftop gardens (aloe). The elderly from nearby senior welfare centers tend the gardens, process the harvest and sell it. This addresses environmental issues and the elderly unemployment problem at the same time.

Love-co Coalition of University Staging a campaign for the promotion of local foods by introducing food Students in Busan points and vegetable garden.

Organizing a flea market on campus.

Greennovation Hanyang University Running classes, field trips and experiential programs.

Turning waste into resources.

Popcorn Association of Various Developing a tree planting application.

University Students Running a restaurant with carbon-neutral menus.

School of “Green” Konkuk University Building a low-carbon eco campus.

SNUT cactus Seoul National University Encouraging aluminum can recycling by giving refunds.

of Science & Technology Building a social network and giving out second-hand textbooks

Onsamiro Yeungnam University and Capitalize on SNS services and blogs to promote carbon neutralization.

Keimyung University Create an online organ donation pledge.

Tree Planet Association of Various University Developing a smartphone application—planting a real tree ith revenues Students (KAIST, etc.) earned by raising virtual plants.

Selected Projects for the Second Carbon-neutral Program

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● GReeN SCHOOl SPONSOReD BY POSCOWe opened the first “Green School with POSCO” on January 1, 2011, which provides junior, middle and high school students with tailor-made education on climate change. POSCO and civic organizations began preparing for the program in 2010. The School helps raise awareness on the global issue of climate change as well as introduces day-to-day activities to protect the environment such as turning off lights and reducing water usage, encouraging students to participate in environmental protection voluntarily.

The Green School has partnered with a dedicated research institution to develop the climate change curriculum, providing students at different age levels with customized learning materials and educational trips. Students who complete the course receive a certificate. Three sessions have been held and 128 students completed the course to date. We also are planning an essay contest among the School graduates to share their stories about how their lifestyles have changed or their awareness on climate change was raised after attending the School.

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Detailed Activities CO2 Reduction

Use the stairs to go as high as the fourth floor 13g

Walk or ride a bicycle to go to a nearby place 2.3kg

Use public transportation for 30 minutes a day 7kg

Use car pools 7kg

Switch off lights and computers at lunchtime or on leaving the office 54g

Turn off the engine when idling for more than three minutes 126g

Remove plugs from the wall when leaving for more than one hour 15g

Turn off lights near windows 13g

Reduce water usage by one minute 19g

Refrain from using throw-away cups and paper towels 7g

Eat meals without leaving food 17g

Adjust targeted temperature by one degree 260g

Reuse the back side of paper 3g

Collect and donate unused clothes 10kg

Come up with ideas for environmental protection -

Separate paper, plastics and other recyclable items from the garbage -

POSCO launched the Green Walk campaign to bring employees and their family members together in pursuit of a greener world. This enterprise-wide program encourages employees to adopt a greener lifestyle that helps to reduce energy consumption and lower GHG emissions. The campaign suggests that employees and their family members engage in the four energy-saving actions (Walk, Switch Off, Reduce and Recycle).

Employees who voluntarily conducted “green” activities with their families can share what they did with other employees by posting photos and essays on the Green Walk homepage. The Green Walk homepage supports a mobile page available on smartphones. The page not only runs forums for employees to show their actions but also provides various contents such as environmental news, expert op-ed., and diverse online events, encouraging people of different ages to participate in “green activities.” Employees and their family members subscribed to the page are given “green coins” depending on their activities that can be used to recharge transportation cards.

The Campaign was launched in 2011 in collaboration with POSCO work councils and local civic organizations. The company held a kick off ceremony for the POSCO Family Green Frontier in 2010 when the Campaign was in the preparation stage. The Frontier, which consisted of 50 employees from the POSCO Family organizations, is in charge of improving and expanding the Campaign. The activities of the POSCO Family Green Frontier are demonstrated on the Green Walk webpage.

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2010 CARBON REPORT

GREEn WORKPlACE

POSCO Family Green Walk Campaign

Webpage : www.greenwalk.co.krMobile page : m.greenwalk.co.kr

The Four Green Actions of the Green Walk Campaign

Walk

Switch Off

Reduce

Recycle

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POSCO engages in various activities to instill greener living habits in employees, reducing GHG emissions in their daily lives. These activities are also being expanded to include family members of the employees and the POSCO Family organizations, contributing still more to reducing GHG emissions in society.

In winter, POSCO lowered targeted indoor space temperature from 23~25˚C to 20˚C to reduce energy consumption. This new guideline is applied to offices at the Seoul POSCO Center, Pohang Head Office, Pohang Works and Gwangyang Works. If indoor temperature is lowered by 4˚C, heating costs can be lowered by about 20 percent. Employees voluntarily began to wear thermal underwear to keep healthy in winter as well as to save energy.

The Gwangyang and Pohang Works run the Lighting Equipment Task Force and strengthen efforts to instill the energy-saving mindset in employees. Light switches were adjusted so that individuals or teams can turn them on and off. Energy-efficient lamps were installed allowing employees to work without turning on the overhead lights. At some shops, lighting ducts help improve the workplace environment and create more comfort working conditions.

POSCO is also expanding the lighting energy saving campaign by improving illumination circuits and installing remote-controlled on/off devices. In addition, an intelligent system has been installed to turn the lights on only when needed. Considering various conditions, researchers analyzed working hours and developed an automated method for detecting when workers are present. As a result, the automatic on-and-off controller cut unnecessary energy expenditures by 92 percent. Going forward, efficiency-enhancing lighting technologies will steadily be adopted, including highly reflective lampshades as well as electrode-less, LED and plasma lamps.

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 and POSCO Group affiliates as well as overseas POSCO offices in more than ten countries, including China, Japan, India, and Mexico. The videoconference system runs on individual PCs, raising operational efficiency as well as reducing GHG emissions.

The Ministry of Knowledge Economy named the Seoul POSCO Center the most energy-efficient structure among the ten commercial buildings reviewed by the 2009 Energy Consumption Survey. The Center’s energy consumption per area stood at 40kgOE/m2, lower than the average of the ten most energy-consuming commercial buildings in Korea (50.7kgOE/m2). The POSCO Center continued to increase energy efficiency by improving facilities as well as their operational methods. For example, the wastewater recycling system was improved and waste heat recovery boilers were installed, while the “energy patrol team” was formed and the energy visual management system was implemented to the main control center. Moreover, POSCO dubbed the Center a “green building” and installed solar photovoltaic street lamps, rainwater tanks and terrestrial biotopes (ecological park), putting the company’s commitment to low-carbon green growth and environmental management into practice. As a result of these efforts, the POSCO Center was certified as an “Eco-friendly Building” by CreBIZ QM, a certificate authority registered to the Ministry of Land, Transport and Maritime Affairs and the Ministry of Environment.

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Campaign for Thermal Underwear

Energy Conservation Campaign at Steelworks

Energy-efficient building

Expanded Videoconferencing

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let’s advance together to share in greater value for all.

We are building green partnerships with other global steelmakers, industry associations and SMEs in

diverse areas in the interest of promoting low-carbon, green growth. We are putting the global

environment first by engaging in the Asia-Pacific Partnership on Clean development and Climate and

other such green partnerships that go beyond national borders. In the future, we will exhibit strong

leadership while working closely with our partners to usher in a new future for the steel industry where

greater value can be shared by all.

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Green partnership

POSCO keeps abreast of global steelmaking industry trends and shares advanced eco-friendlier technologies through continuous communication with trade associations and research institutions at home and abroad. In addition, we promote “win-win” relationships with domestic small and medium-sized enterprises and partner with them on environmental management issues. Moreover, our climate change response activities are disclosed transparently and evaluated publicly.

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IP2010 CARBON

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GREEn PARTnERShIP

Asia-Pacific Partnership on Climate Change

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. This dialogue seeks practical responses to climate change and ways to lower CO2 emissions internationally. To this end, the worldsteel has developed a CO2 data collection method that can objectively determine the GHG emission volumes of steelmakers around the world and requires them to submit their actual emission figures. Moreover, the Association analyzes the data to determine emission volumes by each steelworks and country to identify and disseminate best practices, helping to lower GHG emissions at the national level. POSCO participated in the worldsteel GHG data collection and has been certified as a Climate Action Member.

The Asia-Pacific Partnership on Clean Development and Climate aims to promote international cooperation for the development of clean energy technologies and other climate change responses. To put the Partnership into practice, private-public task forces have been in operation in eight sectors* since April 2006. Governments and steelmakers in seven countries—Australia, Canada, China, India, Japan, Korea, and the United States—have formed the Steel Task Force, in which POSCO has participated since the beginning. These countries account for approximately 60 percent of global steel production. Task Force members are carrying out three key projects, including the publication of a clean technology handbook. Between April 2006 and November 2010, ten official meetings and workshops have convened.

POSCO, the Ministry of Knowledge Economy and Korea Iron & Steel Association jointly held the 5th Steel Task Force Meeting and Workshop in Busan in April 2008. Moreover, POSCO has served as the chair company of a project to develop common methods for the determination of GHG emission reductions as well as for performance benchmarking. In 2010, participants of the project had meetings in Kobe, Japan, in May and in Tokyo, Japan, in November.

Climate Action by the World Steel Association

* The eight sectors: Steel, Aluminum, Buildings & Appliances, Ce-ment, Cleaner Fossil Energy, Coal Mining, Power Generation & Transmission, and Renewable Energy & Distributed Generation

2009-2010 Climate Action Logo

Publication of State-of-the-Art Clean Technology

(SOACT) Handbook

establishment of Common Methodologies to Determine Reduction

Potential and Performance Benchmarking

Development of Mechanisms for eligible Technology Adaptation

Based on expert Diagnoses

Publish a handbook that introduces best practices for energy conservation and environmental improvement in the steelmaking industry. The handbook helps steelmakers make decisions on optimal technologies.

Establish standard methodologies to analyze the energy efficiency of steelmaking processes and the adaptation rates of energy saving facilities.

Determine member country levels and identify obstacles to the adoption of energy conservation technologies.

Provide advice for the adoption of clean technologies through the diagnosis of experts on energy conservation and environmental improvement.

3 Flagship Projects by the Steel Task Force

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IP

Steel Industry Climate Change Response Team

Support to the POSCO Family for Energy Efficiency diagnosis

GhG Inventory for the POSCO Family

Carbon Communication

The Steelmaking Sector Climate Change Response Team, an industry-government cooperative body, was launched in February 2005. The Ministry of Knowledge Economy, Korea Iron & Steel Association, POSCO and other Korean steelmakers are members. The team convened five meetings in 2010, and a workshop on climate change response of the steelmaking industry was held for people from the industry and government at the POSCO International Center in December. POSCO representatives participated in seminars on the establishment of the 2020 Steelmaking Energy Technology R&D Master Plan, GHG & energy report standards, infrastructure to calculate GHG emissions at worksites, and the Korean government’s climate change response policy.

We support POSCO Family companies for diagnosing how efficiently their energy is utilized to realize industry-leading levels of energy efficiency at the Family level. Our engineers visited POSCO-invested companies to diagnose their energy facilities and impart know-how on energy management to their people. We also helped our outsourcing partners and suppliers conduct their own energy diagnoses in conjunction with the government’s “Energy Self-diagnosis for SMEs” project. Under this program, 90 percent of assessment costs were covered by the Korean government, and the remaining 10 percent was funded by POSCO.

POSCO supported major invested companies (ten entities) to establish GHG inventory systems. The project laid the groundwork for accounting GHG emissions and determining reduction targets at the Family level. POSCO and seven affiliates subject to the government’s GHG-Energy management system, which comes into force in 2011, will disclose GHG emission records. Going forward, we will expand our support for GHG inventory building so that our annual Carbon Report can also cover verifications of GHG emissions at key POSCO Family companies.

POSCO discloses CO2 emission levels and efforts to deal with climate change through the annual Sustainability Report and on the official website. Moreover, we have been included in the SAM-DJSI and have participated in the Carbon Disclosure Project since 2003. By doing so, we have allowed a third party to evaluate our climate change responses objectively. The Dow Jones sustainability Indices, organized by Switzerland-based sustainable fund manager SAM, lists some 300 global companies whose sustainability management performances are among the top ten percent. POSCO has been listed on the Index for six consecutive years. In 2010, we were the only steelmaker in the world to be named among the top performers on the Carbon Performance Leadership Index (CPLI) and the Carbon Disclosure Leadership Index (CDLI) in the Carbon Disclosure Project 2010 Global 500 Report. This Report covers the 500 companies listed on the Financial Times Stock Exchange. Such recognition for POSCO’s sustainability management efforts has significant influence on the decision making of global investors and investment ratings agencies.

Moreover, the POSCO Climate Change Forum convenes with experts on climate change and other distinguished scholars from around the world. Meanwhile, we communicate with the Korean 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.

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2010 CARBON REPORT

We are working to strengthen the low-carbon, green growth capability of the POSCO Family, which consists of eighty (32 in Korea and 48 overseas) companies where POSCO possesses a controlling stake. This new emphasis is being made to realize Vision 2020 and reinforce the competitiveness of and synergy generation among not only our core businesses which include carbon steel, stainless steel, specialty steel, and industrial materials, but also new businesses with significant future growth potential such as energy, chemicals, and information & communication technology.

The diversification and globalization of the POSCO Family business portfolio has created the need for an enterprise-wide environmental management. The POSCO Family Global Declaration announced in December 2010 is a significant step toward our realizing such a system. Climate change is an issue that POSCO began to pay attention to early on. In December 2009, we created the POSCO Family Climate Change Response Subcommittee as a conduit for sharing information and making concerted responses to the climate change issue.

POSCO Carbon Report 2010 introduces the POSCO Family companies’ major activities to reduce our overall carbon footprint.

Seven POSCO Family members under the Greenhouse Gas and Energy Target Management Scheme

POSCO FAMIly

POSTECH

POSCO Specialty Steel

SNNC

POSCO Power

POSCO Chemtech

POSCO C&CPOSCO AST

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● ClIMATe CHANGe ReSPONSe STRATeGY POSCO SS realized the risks as well as opportunities posed by climate change early on and has incorporated responses to climate change in corporate strategies. Energy-efficient production facilities have been adopted to reduce emissions during production, and facilities are being switched over to cleaner-burning LNG as fuel to lower stationary combustion emissions. Under the CO2 Emission Reduction Mega-Y program, each business unit sets up and implements plans for energy conservation. POSCO SS will invest about KRW 50 billion by 2020 to reduce electricity and fuel consumption, improve the energy efficiency of facilities, and develop innovative technologies to reduce CO2 emissions.

● GHG eMISSIONS FROM PRODUCTION ACTIvITIeS The CO2 emission intensity at POSCO SS slightly increased from 0.724 t-CO2 /t-S in 2009 to 0.725 t-CO2 /t-S, due to increased proportions of emission-intensive STS wire rods, and heat-treated steel products in annual production.

● GReeN STeel & BUSINeSS

Our cumulative investment between 2001 and 2010 in energy efficiency improvement amounted to KRW 23 billion. Our production processes now utilize high-efficiency motors, inverters, and burners. The adoption of a waste heat recovery system enabled us to further reduce our energy consumption. We have steadily improved our energy efficiency through the application of Direct Solution Treatment (DST), which shortened the heating process of rolled steel products, and hot-charge rolling. These measures for energy cost reduction resulted in a total cost saving of KRW 1.39 billion in 2010. We have been changing over our primary fuel source from oil to LNG to reduce our stationary combustion emissions from the reheating furnaces and heat-treating furnaces. Eighty-one percent of this transition effort was completed between 1997 and 2009, and we expect to achieve 100% replacement in 2011.

POSCO Specialty Steel

POSCO Specialty Steel, formerly Sammi Steel, was acquired by the POSCO Group in 1997 and has evolved into a top-ranked specialty steelmaker with an annual crude steel production capacity of 960,000 tons. Our product portfolio includes stainless steel wire rods, steel bars, machine tool steel products, carbon & alloy wire rods and steel bars, steel pipes, free-forged steel products, and specialty alloys. POSCO SS sells products in 26 countries and operates local offices in China, Thailand, and Japan.

In 2010, the company posted an operating profit of KRW 146.4 trillion on revenues of KRW 1.54 trillion, producing 820,000 tons of crude steel for the year. To grow into a green company with revenues of KRW 4.0 trillion by 2020, POSCO SS is investing in the installation of eco-friendly electric furnaces and utilization of clean energy.

2007 2008 2009 2010

Emission intensity 0.632 0.688 0.724 0.725

(Unit: t-CO2/t-S)

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2010 CARBON REPORT

● ClIMATe CHANGe ReSPONSe STRATeGYThe enactment of the Framework Act on Low Carbon, Green Growth is anticipated to make efficient energy use, low-carbon green electricity production, and stable electricity supply the top priorities of the power generation industry. POSCO Power believes these developments pose not only risks but also new business opportunities and is adjusting business strategies accordingly to achieve annual revenues of KRW 1.7 trillion by 2020. Guided by the vision of being the World’s Best GREEN Energy Company, POSCO Power will strive to become a true global leader in the new and renewable energy area.

We are raising the energy efficiency of our operations by introducing high-efficiency power generation facilities. These efforts have already improved the energy efficiency of the Incheon Power Plant Complex from 41% to 52%. The new power plants that use by-product gas at the Gwangyang Works are expected to elevate its energy efficiency from 37% to 46%.

● GHG eMISSIONS FROM PRODUCTION ACTIvITIeSVirtually all (over 99%) of GHG emissions from POSCO Power comes from burning fuel to generate electricity. Less than 1% is attributable to the actual use of electricity by the power generation facilities. With the completion of the residual gas power plants at Gwangyang, high-intensity GHG emissions from by-product gas combustion were added to our emissions profile. Consequently our emission intensity increased by approximately 32% in 2010 compared with the previous year’s level. On the other hand, the power generated from by-product gas recovered at the Gwangyang Works contributes to a stable electricity supply and reduces energy consumption in the overall steelmaking process.

● GReeN eNeRGY & BUSINeSSIn 2011, POSCO Power plans to conduct a survey of energy efficiency at power plants to identify potential areas for greater energy conservation and ways to further improve energy efficiency. We will increase our power generation capacity fueled by cleaner-burning LNG, facilitate the recycling of waste heat through residual gas-fired power generation, and promote new and renewable energy businesses. We are also building an LNG-fired combined-cycle power plant with a 2,000MW capacity near our existing power plant complex. The first phase of this projects is scheduled for completion in June 2011, adding 1,200MW to our overall power generation capacity. The future growth momentum secured from these endeavors will help us solidify POSCO Power’s position as the best energy producer in Korea.

POSCO Power POSCO Power started up commercial operations in 1972 and has grown into the largest independent power producer in Korea, with a facility capacity of 1,800MW at Incheon. In December 2010, POSCO Power added a capacity of 284MW by completing the construction of two gas power plant units, which utilize by-product gas generated at the Gwangyang Works. We have designated new and renewable energy as a new growth driver in response to POSCO’s low-carbon, green growth policy and are promoting the fuel cell business, a next-generation eco-friendly energy solution. POSCO Power will further bolster leadership in the green growth of Korea by focusing resources on the new and renewable energy businesses, including wind, solar, and tidal power generation.

(Unit: t-CO2/MWh)

2007 2008 2009 2010

Direct emissions (Scope 1) 0.471 0.477 0.499 0.650

Indirect emissions (Scope 2) 0.004 0.005 0.007 0.002

Total 0.475 0.482 0.506

● ClIMATe CHANGe ReSPONSe STRATeGYGreen Growth through Production Technology Sophistication is POSCO C&C’s new vision for growth. To realize this vision, we are participating in the enterprise-wide endeavors of the POSCO Family for green growth. Our initiatives for green growth aim to achieve low-carbon production capability by improving the efficiency of our energy facilities, develop environment-friendly products, and lower the intensity of CO2 emissions. We plan to invest approximately KRW 9.0 billion by 2020 in assessing our energy facilities for higher energy efficiency, reducing our fuel consumption, transiting to high-efficiency production facilities, and developing innovative technologies to reduce our CO2 emissions.

● GHG eMISSIONS FROM PRODUCTION ACTIvITIeS

The primary products we produced in 2010 were zinc- and aluminum-alloy coated steel sheet and pre-painted steel sheet. Our CO2 emission intensity decreased by about 2.7% to 0.109 t-CO2/t-S in 2010 from the average of 0.112 t-CO2/t-S recorded between 2007 and 2009.

● GReeN STeel & BUSINeSSPOSCO C&C is steadily investing for better energy efficiency. We are recovering waste heat and enhancing the operational efficiency of motors. Conventional lighting systems are being replaced with high-efficiency lighting and our ceiling systems are being altered to let in more natural light. POSCO C&C is particularly committed to cutting CO2 emissions by adopting a CO2 capture system and fuel-cell generators. We are focusing R&D competencies on the development of new, eco-friendly profit sources to lay the foundation for green growth. The new products and business areas our R&D efforts include materials used in printed circuit boards for LED lighting and green energy systems, installation of fuel cells for power generation, power generation using roof-top solar panels, and heating systems powered by eco-friendly energy sources, which will further strengthen the POSCO C&C business portfolio.

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Founded in 1988, POSCO C&C specializes in developing and manufacturing galvanized, aluminized, and color steel for the automotive, home appliance, and construction industries. Annual production capacity today stands at one million tons. Our technological prowess demonstrated by the development of aluminum-stainless steel sheets and aluminum sheet for fuel cells enabled us to secure over 70% of the domestic market share.

In 2010, POSCO C&C recorded an annual revenue exceeding KRW 1.0 trillion for the first time. Our next target is KRW 4.0 trillion in revenues by 2020. To achieve this goal, we will broaden our business horizons to include the surface treatment of carbon steel products as well as non-carbon steel products such as aluminum and stainless steel materials, and materials for LED substrates.

POSCO C & C

(Unit: t-CO2)

2007 2008 2009 2010

Direct emissions (Scope 1) 55,188 55,892 48,991 56,684

Indirect emissions (Scope 2) 49,396 47,012 41,851 46,844

Other emissions 19 64 65 71

Emission intensity (t-CO2/t-S) 0.114 0.107 0.114 0.109

G

● ClIMATe CHANGe ReSPONSe STRATeGYPOSCO Chemtech is committed to making all business activities follow the low-carbon, green growth philosophy. Our priority is on maximizing energy efficiency and thereby minimizing our carbon footprint. In addition to facility upgrades to raise energy efficiency, we will invest about KRW 10.0 billion in developing innovative CO2 reduction technologies for our non-energy business segments. Our goal is to reduce our annual CO2 emission volume by 38,000 tons by 2020. To achieve this target, POSCO Chemtech will recycle more byproducts and expand into the environmental and energy efficiency sectors.

● GHG eMISSIONS FROM PRODUCTION ACTIvITIeSIn 2010, the CO2 intensity at our lime calcining and refractory plants decreased by about 0.4%, from the three-year average (2007-2009) of 2.40 t-CO2/t-CaO, MgO to 2.39 t-CO2/t-CaO, MgO.

● GReeN ReFRACTORIeS & BUSINeSSPOSCO Chemtech signed a voluntary agreement with the Korean government regarding energy efficiency enhancement, and reduced CO2 emissions by about 32,800 TOE between 2000 and 2009 through initiatives to use energy more efficiently. During the agreement period, we reduced our electricity consumption by installing inverters, and invested in streamlining the operation of our firing furnaces and a waste heat recovery system.

Meanwhile, we plan to expand our business scope from refractory materials and environment-friendly segments to include lime and chemicals to turn primary fossil fuels into value-added products. Other measures to reduce greenhouse gas emissions include the operation of waste refractory recycling plant to produce alternative fuel sources, and the production of light calcium carbonate from our byproducts. In these ways, we aim to contribute to GHG emission reduction and energy efficiency improvement.

44

2010 CARBON REPORT

POSCO Chemtech Established in 1963, POSCO Chemtech is a leader in refractory making as well as furnace building and repair. The company has supplied various refractory materials to POSCO and other steelmakers as well as to cement and glass makers. Export markets include Japan, China, Indonesia, and Australia. In addition, POSCO Chemtech operates the chemical conversion treatment factories at POSCO’s Pohang and Gwangyang Works.

In 2010, POSCO Chemtech reported KRW 756.0 billion in annual revenues and KRW 70.2 billion in operating income, and has set a revenue target of KRW 13.8 trillion in 2020 as part of POSCO’s Vision 2020. In the years to come, POSCO Chemtech will strive to grow into a leading manufacturer of general chemical materials by building upon the highly-successful carbon materials business.

2007 2008 2009 2010

Direct emissions Lime calcining plant 0.84 0.81 0.83 0.83

(Scope 1) Refractory materials 1.31 1.23 1.50 1.35

Indirect emissions Lime calcining plant 0.04 0.04 0.04 0.03

(Scope 2) Refractory materials 0.19 0.18 0.20 0.18

Total 2.38 2.26 2.57 2.39

(Unit: t-CO2/t-CaO,MgO)

G

45● ClIMATe CHANGe ReSPONSe STRATeGYSNNC is making diverse proactive responses to climate change and related international movements. Internally, we established the Greenhouse Gas Reduction Committee to cut emissions. SNNC is also participating in the POSCO Family’s global environmental management program, which aims to turn risks posed by the climate change into new opportunities. Our endeavors for low-carbon, green operations are focused on transitioning to low-carbon FeNi production processes through highly efficient energy use, and development of technologies for emission intensity reduction and alternative energy sources. With a budget of KRW 16.0 billion, SNNC will develop innovative technologies to reduce CO2 emissions, improve energy efficiency, recycle slag into value-added products, and process low-grade nickel ore by 2018. These efforts will help make SNNC a global leader in low-carbon FeNi manufacturing.

● GHG eMISSIONS FROM PRODUCTION ACTIvITIeSSince its establishment in October 2008, SNNC has managed to reduce the CO2 emission intensity per ton of FeNi produced by approximately 2.6% from 6.18 t-CO2/t-FeNi in 2009 to 6.01 t-CO2/t-FeNi in 2010.

● GReeN FeRRONICKel & BUSINeSSSNNC carefully controls heat generated by the electric and reductive furnaces to improve process heat efficiency. Our programs to reduce the emission intensity of our energy use (electricity and coal) include the recycling of waste heat and combustion air to dry ores and coal, the development of alternative fuel sources such as waste plastic for our rotary kiln burner system, and the development of a hydrometallurgical process for low-grade ore.

SNNC also runs a real-time monitoring system of GHG emissions and energy efficiency, is installing LED lighting in buildings and is constructing a highly energy-efficient captive power plant. These programs for environment-friendly, green technologies are expected to help steadily reduce our CO2 emissions and fuel consumption.

SNNC is a joint venture with a New Caledonia-based nickel mining operation established in 2006. Our core product is ferronickel (FeNi), an essential raw material for stainless steel, and we operate the world’s largest-capacity electric furnace. Striving to become the Global No. 1 in ferronickel production technology, we achieved KRW 519.9 billion in revenue and KRW 159.9 billion in operating income in 2010, while producing 20,000 tons of nickel. Plans call for the completion of a second production facility in 2014, bringing annual Ni production capacity to 55,000 tons.

SnnC

2008 2009 2010

Direct emissions (Scope 1) - 3.94 3.67

Indirect emissions (Scope 2) - 2.24 2.35

Total - 6.18 6.02

(Unit: t-CO2/t-FeNi)

46

2010 CARBON REPORT

POSCO AST POSCO AST (formerly Daehan ST) specializes in stainless steel cold rolling products and was acquired by POSCO in July 2009. Our one-stop cold rolling production facilities, located in Ansan City, Gyeonggi Province, produce wide-width products, high-precision thin steel sheet, and narrow-breadth products to meet diverse customer needs. Our reported revenue was KRW 330.0 billion and operating income amounted to KRW 12.2 billion in 2010, with total production reaching 200,000 tons. We aim to achieve an annual revenue exceeding KRW 1.0 trillion by 2020 by funneling our resources into the development of low-carbon, value-added products and expansion of sales channels.

● ClIMATe CHANGe ReSPONSe STRATeGYPOSCO AST, guided by a commitment to green management, aims to achieve the vision of being a “market and technology leader in precision stainless steel and slitting products.” Our strategy for reaching this vision is to transition to low-carbon production processes, expand the use of energy-efficient materials, and participate in the enterprise-wide green growth projects of the POSCO Family. POSCO AST will spend KRW 3.4 billion to reduce piped LNG consumption by upgrading systems for heat loss prevention, combustion and energy recovery.

● GHG eMISSIONS FROM PRODUCTION ACTIvITIeSIn 2010, our CO2 emission intensity was 0.23 t-CO2/t-S. Our emission intensity has increased due to our investment in two heat treatment furnaces and one precision rolling unit in 2009 and wide-width cutting facilities in 2010. However, POSCO AST stays committed to reducing process emissions of CO2 through ongoing efforts to improve energy efficiency.

● GReeN STAINleSS STeel & BUSINeSSPOSCO AST signed a voluntary agreement with the Korean government in 2004 regarding energy conservation and reduction in GHG emissions. Under the agreement, we have installed boilers using waste heat, operated inverters, and replaced conventional lighting with more efficient systems in attempts to reduce CO2 emissions. The waste heat boilers, in particular, produce some 10,000 tons of steam each year for used in our production process and heating system.

In 2011, we plan to achieve our emissions reduction target by preventing the heat loss of annealing furnaces and refurbishing burners for higher energy efficiency. Our focus is also placed upon the development of new value-added strategic products and eco-friendly stainless steel products for green growth.

POSCO AST will continue to contribute to reducing GHG emissions in society by supplying solar panels, a core component of solar photovoltaic power systems, window spacers that improve windows’ insulation performance, and other innovative products for energy conservation.

2007 2008 2009 2010

Direct emissions (Scope 1) 0.08 0.08 0.09 0.10

Indirect emissions (Scope 2) 0.12 0.12 0.13 0.13

Total 0.20 0.20 0.22 0.23

(Unit: t-CO2/t-S)

● ClIMATe CHANGe ReSPONSe STRATeGYPOSTECH is dedicated to the development of Korea’s green technology industries, steadily expanding the proportion of green technology research projects and increasing investment in green technology education. The academic research and education on basic green technologies carried out by POSTECH significantly contribute to the global advancement in green technology and supply of green technology professionals. These will also provide new growth drivers for the POSCO Family members as well as the green industries of Korea.

POSTECH was selected to participate in the government’s GHG and energy target management scheme. Through consultation with the Ministry of Land, Transport and Maritime Affairs which supervises the scheme, POSTECH will set energy reduction targets in September 2011 and establish in-house organizations (Energy Control Committee and Working Group) to implement the plan. At the same time, POTECH will encourage organizational members to participate in the effort to reduce energy consumption.

● GReeN GROWTH TeCHNOlOGY R&DPOSTECH remains committed to the research and development of green growth technologies.

● GReeN GROWTH TeCHNOlOGY eDUCATION & TAleNT NURTURING

● GReeN ReSeARCH & BUSINeSSPOSTECH cooperates with POSCO to develop new steelmaking technologies. Currently, we are focusing on the development of a technique for separating CO2 from emissions generated from the steelworks and on steel products that will be used in environment-friendliy vehicles.

POSTECH consistently strives to nurture human resources specializing in green technologies. We graduate some 400 green technology engineers annually through the Division of Advanced Nuclear Engineering, Graduate School for Wind Energy, Ocean Sciences & Technology Institute, Graduate Institute of Ferrous Technology, Eco-Design Graduate Program. At the same time, researchers at POTECH conduct studies on about 125 green energy projects.

47

Pohang University of Science and Technology (POSTECH) was established in 1986 as a higher education institution dedicated to researching advanced science and technology theories and their wide-based applications. POSTECH has offered top-tier education to nurture world-class engineers. POSTECH is also cooperating with industry, other universities, and research institutions. By sharing the research findings with society, POSTECH continues to contribute to the nation and humankind.

POSTECh

GETI* Field Solar cells Fuel cells

Rechargeable LEDs

Carbon technologies batteries capture

Number of projects 34 19 27 14 31

Amount 1.83 1.97 1.73 3.07 2.52

Non-GETI Field E-car Marine bio CNT

Wind power Functional technologies generation materials

Amount 10.7 1.0 3.0 0.15 0.24

* GETI: Green Energy Technology Index

Division of Advanced Graduate School Ocean Science & Graduate Institute of Eco-design

Nuclear Engineering for Wind Energy Technology Institute Ferrous Technology

Entity in charge Ministry of Education, Ministry of Knowledge Ministry of Education, POSCO Ministry of Environment Science and Technology Economy Science and Technology

Annual number 20 20 20 40 47 of people

Budget 2.5 1.25 18.2 19.0 0.13

(As of 31 December 2010, Unit: KRW in billions)

(As of 31 December 2010, Unit: KRW in billions)

48

independent assurance report

To the management of POSCOWe have been engaged by the management of POSCO to perform certain independent assurance activities in regards to the following aspects of POSCO’s 2010 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 years ended 31 December 2010 and 2009 as described in table on page 14. Information in respect of the year ended 31 December 2008 is not within the scope of this work.

• CO2 reduction in society data in table on page 15 and the amount of equipment investment (launched in 2010 or before and completed in 2010) and research and development projects (launched in 2010) to reduce greenhouse gas emissions on page 15.

Samil PricewaterhouseCoopers

Partner, Joonki Min

April 13, 2011

Respective responsibilities of the management of POSCO and Samil PricewaterhouseCoopersThe management of POSCO is responsible for preparing the subject

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

Accounting Guidelines and the POSCO Carbon Reporting Procedures.

Our responsibility is to provide a conclusion on the subject

matters based on our assurance procedures in accordance with the

International Standard on Assurance Engagements 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 performedWe 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 data and the

amount of equipment investment (launched in 2010 or before and

completed in 2010) and research and development projects (launched

in 2010) to reduce greenhouse gas emissions, 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 limitationsNon-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 and the POSCO Carbon Reporting

Procedures.

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.

OpinionBased on the results of our procedures:

• In our opinion, direct (Scope 1) & indirect (Scope 2) CO2 emissions per ton of crude steel for the years ended 31 December 2010 and 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 data and the amount of equipment investment (launched in 2010 or before and completed in 2010) and research and development projects (launched in 2010) to reduce greenhouse gas emissions are not presented fairly, in all material respects, in accordance with the POSCO Carbon Reporting Procedures.

49

inDiCeS

Indicator Description Pages Found Extent of

Reporting

2.3.2

Please provide your company's direct greenhouse gas emissions (dGhG SCOPE 1) for the part of your company's operations for which you have a reliable and auditable data acquisition and aggregation system

14

Please provide your company's indirect greenhouse gas emissions from energy purchased 2.3.3 (purchased and consumed, i.e. without energy trading) (IGhG SCOPE 2) for the part of your company's 14 operations for which you have a reliable and auditable data acquisition and aggregation system.

Please provide your company's electrical and thermal energy purchased (purchased and consumed, 2.3.4 i.e. without energy trading) for the part of your company's operations for which you have a reliable 19 and auditable data acquisition and aggregation system.

2.4.1

does your company use CO2 intensity as a management KPI? If yes, please provide the definition 22 of the carbon intensity used as well as the value for financial year 2009.

2.4.2

Please indicate your company's corporate targets to reduce direct greenhouse 13 gas emissions, either in absolute emissions or emission intensity terms or both.

2.4.3

As part of Scope 3 in the GhG Protocol, please indicate how your company considers GhG emissions 14 for your company's supply chain (upstream), customers (downstream) and support services.

2.4.4

has your company undertaken a sensitivity analysis of the impact on financials if energy prices 9 (fossil fuels, electricity) strongly increase or a tax is put on CO2 emissions?


Reporting

3 direct energy consumption by primary energy source 19

4 Indirect energy consumption by primary source 19

5 Energy saved due to conservation and efficiency improvements 18,19

6 Initiatives to provide energy-efficient or renewable energy based products and services, 28,29 and reductions in energy requirements as a result of these initiatives

7 Initiatives to reduce indirect energy consumption and reductions achieved 19

16 Total direct and indirect greenhouse gas emissions by weight 14

17 Other relevant indirect greenhouse gas emissions by weight 14,15

18 Initiatives to reduce greenhouse gas emissions and reductions achieved 13

GRI IndICATORS

Reported Not applicable


Reporting

Management 1. Governance Group and Individual Responsibility 10,11

Indivisual Performance 13,14,15

2. Strategy Risk Management Approach 8,9

business Strategy 12

Engagement with Policy Makers 9,13

3. Targets and Initiatives Targets 13

Emissions Reduction Initiatives 13

4. Communications Communications 39

Risk &Oppoutunity 5. Climate Change Risk Regulation/physical/other 8,9

6. Climate Change Opportunities Regulation/physical/other 8,9

Emissions 7. Emissions Methodology base year 13

Methodology 13

8. Emissions data boundary 13

Scope1 and 2 Emissions data 14

data Accuracy 48

External Verification or Assurance 48

Carbon dioxide Emissions from biologically Sequestered Carbon -

9 Scope 1 Emissions breakdown 14

10 Scope 2 Emissions breakdown 14

11 Scope 2 Contractual Emissions 14

12 Energy 19

13. Emissions Performance Emissions history 13,14

Emissions Intensity 13,14

14 Emissions Trading -

15 Scope 3 Emissions 14

SAM dJSI IndICATORS

CdP IndICATORS

Carbonreport2010t o w a r d F o u r G r e a t s

Download www.posco.com e-mail [email protected] Tel 02-3457-0902 Fax 02-3457-1936 Address POSCO Environment & Energy Planning Dept., Climate & Energy Affairs Group, 892 Daechi-dong, Gangnam-gu, Seoul, Korea 135-777

The opinions of readers like you are important for us to continue improving the contents of this Carbon Report. To have your ideas reflected in future Reports, please read this one, write your impressions on the back of this card, and mail or fax it to us at the addresses listed below.

ReadeR OpiniOn QuestiOnnaiRe

1. How satisfied are you with this report?

□ Very Satisfied □ Satisfied □ Neutral □ Dissatisfied □ Very Dissatisfied

2. What areas are of greatest interest to you?

□ Vision for addressing climate change and GHG reduction targets

□ GHG emission performance □ Carbon management risk management & governance structure

□ Green Steel □ Green Business □ Green Life □ Green Partnership

3. Please feel free to give your opinion of this Carbon Report.

4. To which of the following groups to you belong?

□ Customer □ Shareholder □ POSCO employee □ Supplier □ NGO □ Local resident

□ Investment analyst □ Student □ Research institute employee □ Other

Download www.posco.com e-mail [email protected] Tel +82-2-3457-6245 Address POSCO Environment & Energy Planning Dept., Climate & Energy Affairs Group, 892 Daechi-dong, Gangnam-gu, Seoul, Korea 135-777

You may find various kinds of information on the POSCO website (www.posco.com), including a PDF version of this Report. You may use the follow email, telephone number or mailing address to submit questions or comments on this Report:

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Documents

Carbon report 2010 - main | POSCO · Business Strategy with Climate Change Integration . Since the first POSCO Environmental Report was released in 1995, we have regularly disclosed