How we can reduce one-tenth global carbon footprint with ‘net-zero steel’


The strategy is clear: acting now is critical to our longer-term climate goals and to ensure a smooth transition to net zero. Long asset lifecycles mean that investments in new or existing steel mills from 2030 onwards must be consistent with a net zero target by 2050 or there is a risk that these mills will strand. This decade is critical. Commercial-scale, near-net-zero plants must be operational before 2030 to achieve proof of concept.

An aggressive ramp-up this decade could result in significant emissions reductions that could help the planet stay within its 1.5°C carbon budget. An incremental reduction of around 10% by 2030 could be achieved at little additional cost. However, additional regulatory and policy measures, equivalent to a carbon price of $52 per tonne of CO2 by 2030, could allow for a 33% reduction. That would avoid 1 gigatonne (Gt) of emissions annually through 2030 and an additional 15 Gt in cumulative emissions savings by 2050 compared to a delayed transition — more than China’s total annual emissions and 3% of the remaining global carbon budget.

The Net-Zero Steel Sector Transition Strategy identifies a number of technologies that the sector can use to decarbonize. The directly reduced iron steel production with natural gas offers a saving of almost one ton of CO2 per ton of crude steel or around 45% compared to the average emission intensity of primary steel production. Carbon capture and storage (CCS) systems can be attached to existing blast furnace oxy-furnace for deeper reductions. As the cost of producing carbon-free hydrogen from renewable energy decreases, its use in steelmaking is becoming increasingly competitive. The attractiveness of these options depends on the available local infrastructure and access to different energy sources.

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However, the sector will face some residual emissions that are nearly impossible to reduce to zero. The Forum’s analysis suggests that this could equate to around 300 million tonnes per year – around 10% of the sector’s current emissions – mainly due to CCS capture rates of less than 100% and the failure of electrodes in electric arc furnaces. These residual emissions require investments in either technologies that remove carbon from the atmosphere or in nature-based solutions.

In the context of the overall investment needs inside of the steel sector by 2050, the additional costs of decarbonising the sector are modest. However, additional investments are necessary Outside in the sector – mainly in support of infrastructure such as power generation and carbon storage – are likely to be higher. The average cost of steelmaking in 2050 in a heavily decarbonized world would likely be only 15% higher than if no concerted action to decarbonize the sector were taken.

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A decarbonized steel sector promises to drive the decarbonization of the entire economy. It would enable zero-carbon commitments from the construction, automotive, transport, energy and packaging sectors. Crucially, this would also create demand for other technologies critical to the low-carbon transition, such as hydrogen and CCS, and help bring their costs down.

Overcoming the green bounty

But there are significant obstacles along the way – not the least of which is that first movers face a substantial green bounty. In a globally competitive market, where the price is set by the marginal producer, this first-mover disadvantage threatens, at best, to significantly delay the sector’s transition to a low-carbon industry.

This is where the Sector Transition Strategy comes in across all industries. The strategy drives the ongoing momentum and leverages supply chain collaboration to bridge the “green premium” that will be incurred for low-carbon steel. This is essential for early activation
Measures to decarbonize steel. Reports from the World Economic Forum show that full decarbonization has little impact on the final price and could be accomplished for less than €500 or for less than a 2% cost increase on a €30,000 car.

There are also other tried and tested policies to address this green bounty. These include public procurement obligations, government subsidies, carbon taxes, emissions trading schemes and emissions performance standards. Bilateral trade agreements can create demand for low-emission steel. Such agreements are emerging, such as Gestamp’s collaboration with ArcelorMittal and BMW’s partnerships with Salzgitter and HBIS.

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It is crucial that a level playing field is created to enable large-scale transition. That means agreeing to strict CO2 standards to define “green” steel. It also requires regional agreements between steelmakers, consumers and governments to align and harmonize carbon pricing and similar regulations at a multinational level.

There is a clear need for a new international forum that can bring together the most ambitious elements of the industry, its value chain and government officials to chart a way forward that addresses barriers to the low-carbon transition of the steel sector. Unlike inherently international sectors such as aviation and shipping, steel is both a domestic priority and a trade-exposed industry. With a critical mass of steel companies and their governments targeting net-zero emissions by mid-century, a new convening body separate from long-standing global overcapacity and trade disputes is needed more than ever.

Decarbonizing the steel sector will be a challenging endeavor. There is much to do. But the Forum-backed Steel Transition Strategy outlines a path to net zero that is realistic, affordable and achievable.





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