Effective data, policy, and public-private cooperation will drive steel decarbonisation
Climate Group had the privilege of uniting steel, heavy industry and policy representatives to discuss recent developments towards a lower emission steel industry. The focus was on the key enabling actions that will accelerate the steel industry transition – away from a reliance on fossil fuels – in Germany, Europe and the world.
The key takeaway was that change is coming
Both steelmakers and their customers are now recognising that the status quo isn’t sustainable. This is a good start – but we need to speed things up by putting essential building blocks in place. We need to ensure good availability of emissions data and effective policies to lay the groundwork for a collaborative transition.
Steel is rarely used in isolation. Many participants noted that assessing the environmental impact of products becomes significantly harder when considering other materials or operating across borders. Even within the EU, varying carbon reporting methods create headaches for companies with transnational energy projects.
Enabling not burdening
For carmakers seeking to reduce the environmental impacts of steel, aluminium, plastics and batteries, the myriad reporting models, standards and product requirements pose a major challenge. It’s vital to address emissions from steelmaking through promoting innovation rather than burdening people with excessive red tape.
The wider impacts of the transition also need to be considered. We need to ensure a just transition for industrial communities. We also need to create the necessary conditions for a move away from blast furnace steelmaking, while ensuring a steady continued steel supply for buyers. We have to look at the bigger picture. As one steelmaker participant noted, a narrow focus, i.e. on reaching the lowest single emissions number in steel purchasing, keeps buyers from supporting the required broader systems change.
Effective steel decarbonisation action won’t happen until…
Widespread access to comprehensive data on current and future steelmaking emissions is the norm. First and foremost, we need clear and comparable data. The consensus among policymakers and representatives from both steelmakers and users is that the lack of clearly defined, transparent and comparable definitions is a major barrier to progress. It was fascinating to hear about the development of the Low Emission Steel Standard (LESS) from the German Steel Association (WV Stahl) and the hope expressed that a standard could help create a market for lower emission steel.
Multiple definitions of green steel exist, and more are emerging all the time. While not ideal, the range of standards reflects the global nature and breadth of applications that define the market. The key to unlocking progress will be finding ways to create interoperability and comparability. This would give steel-using companies the confidence needed to justify paying a premium price for a lower emission steel product.
The right policies need to be in place for lower emission steel to effectively compete in the marketplace
Data that enables companies to validate green claims and give steel buyers confidence in their purchases is essential, but we also need to find ways to create a level playing field. That will lead to difficult conversations about “green premiums” – and how to ensure that steel markets can absorb the cost of financing the transition.
Practical actions are needed to move towards a lower emission steel world
We heard from steelmakers about how they were investing in decarbonising their primary and secondary steelmaking operations and how their customers were responding to these efforts. With huge investments needed to realise this global transition, policy support through the creation of ‘Lead Markets’ and the Carbon Contracts for Difference scheme currently being rolled out in Germany are very welcome. But it is clear that these measures are only part of the solution.
From enshrining requirements for lower emission steel in public procurement and lead markets such as construction and renewable energy, and ensuring the deployment of sufficient renewable energy to make green hydrogen a reality, it is clear that these challenges extend far beyond the realms of a single government or industry.
The journey to lower emission steel is going to be immensely challenging – but also presents tremendous opportunities
New forms of public-private cooperation will be crucial for the steel industry to help meet the emissions reduction targets essential for containing global temperature rise. Additionally, innovative policymaking approaches are needed to put an end to siloed decision-making processes.
Finally, we must recognise that for steelmakers, their customers and a global population which relies on steel, the industry transformation will require significant investments of resources. The question we need to answer is: Who will bear the costs? We need an approach which delivers both fast decarbonisation and the continued production of climate-aligned steel.
Note
We are grateful to representatives from the German Federal Ministry for Economic Affairs and Climate Action (BMWK) and the German Federal Environment Agency (UBA) for their attendance and contribution to the debate. We would also like to thank the German Steel Association (WV Stahl) for both their work on developing LESS and for presenting an overview of the standard at the workshop. In addition, we would like to thank the European Climate Foundation for grant funding which enabled SteelZero to carry out this work.
