Since the 19th century, steel has underpinned the infrastructure of the modern industrial economy have been constructed. Nonetheless, not too dissimilar to the increased scrutiny which has been assigned to both oil and coal sectors, the steel industry is now facing intensified exploration in regard to its contribution to CO2 emissions. According to data assimilated by the World Steel Association, the iron and steel sector is the greatest industrial producer of carbon dioxide, accounting for approximately 7-9% of all direct fossil fuel emissions, a greater aggregate than CO2 emissions attributed to India. Further to this, data recorded by the International Energy Agency, suggest that the sector is responsible for 2.6 gigatons of direct carbon dioxide emissions each year; a figure greater than the rate of CO2 emissions which can be attributed to both chemicals and cement sectors.
As countries look to commit to their environmental targets, there is a greater sense of urgency to alter the methodology for which iron, the alloying metal behind steel, is extracted from its corresponding ore. The current process by which this is achieved involves heating the iron ore to such a temperature that the lowest-cost effective approach is carbon-based; an economically viable alternative is yet to be adopted by large industrial furnaces. The sector’s biggest producers, inclusive of ArcelorMittal, Thyssenkrupp and Chinese firm Baowu Group, have confirmed their active involvement in several laboratory endeavours designed to produce an industrially suitable and green alternative. Incentives to decarbonise the steel industry have also been adopted by several unions; the strictest of which have originated as a consequence of the EU’s environmental agenda. The implementation of a robust trading scheme, operating in all EU countries plus Iceland, Liechtenstein, and Norway, promotes investment within an array of low-carbon technologies, whilst simultaneously working to ensure that emissions are cut in a manner which is also cost-efficient for the firm.
Furthermore, the race to capture market share proposed by a clean European steel industry is beginning to intensify with many countries involving themselves in the matter. At the epicentre of the European mass mobilisation is Sweden. Several projects are underway within this geographic, including that of the country’s 2.5 billion EUR investment, referred to as the H2 Green Steel Initiative, which will endeavour to build a large-scale greenfield steel manufacturing facility in the Boden-Luleå region of northern Sweden. The scheme, inspired by the HYBRIT project founded by Swedish specialty producer SSAB, will aim to target European original equipment manufacturers (OEMs) through the offering of fossil-free steel at a competitive and low-cost position. Specifically, the Norrbotten geographic offers a plethora of unique conditions for fossil-free steel production, including unrivalled access to an abundance of renewable energy sources, high-quality iron ore, a large port positioned in Luleå alongside the assimilation of deep expertise within the fields of metallurgy and steel production. It is anticipated that the project will increase Swedish net export value by around 30 billion SEK (3.62 billion USD) upon achieving full production.
Indubitably, a change in the functioning of industrial complexes is required to combat global warming, nonetheless the magnitude of the challenge at hand must not be ignored. Reports from ArcelorMittal suggest that decarbonisation of its current operations could potentially cost between 15-40 billion EUR as it strives to meet the EU’s proposal of net-zero carbon emissions by 2050. The reality is that a far more rigorous approach is required, beyond merely an alteration in companies’ policies’, in order to ensure that net zero steelmaking represents a viable prospect. Further efforts are required from governments and unions alike; Brussels are currently cementing plans for a “carbon border adjustment mechanism” which would essentially prevent cheap foreign products with detrimental environmental impacts from entering the European carbon market sphere. Hence the execution of this action will look to preserve the integrity of domestic companies in their adoption of green technologies. A successful reversion to the latter in the procurement of steel will necessitate increased policymakers’ involvement through the introduction of perpetual subsidies to eradicate the current characterisation of a carbon-free steelmaking as a premium-cost product.
Ultimately, the conversion of the global steel industry to one which aligns with a 1.5°C future will require the synchronisation of both policymakers and firms alike. Whether the conditions to do so will occur, remains to be seen, however the momentum observed within this industry in comparison to other industrial-related sectors is a cause for optimism.
By Sasha Reed
Sector Head: Daniel Aliwell