Now is the time to decarbonise steelmaking

15 October 2020

Jenny Chu, Head of Energy Productivity Initiatives at the Climate Group and Alison Lucas, Executive Director at ResponsibleSteel

Steel is one of our most important engineering and construction materials. From buildings to bridges, and scissors to saucepans, it is found everywhere, and present in many aspects of our everyday lives.

Crucially however, manufacturing steel is a carbon intensive process, with every tonne produced creating around 1.8 tonnes of carbon dioxide. Total greenhouse gas emissions from the steel sector alone account for around 7% of annual global emissions.

The future of steel was a point of discussion during Climate Week NYC last month, with a panel event specifically focused on how innovative partnerships can help to achieve a green industrial revolution. Here, the message was clear: transitioning heavy industry sectors like steel can drive emissions cuts while stimulating growth – but we have to act now.

Transitioning industry

Nearly five years after the Paris Agreement, and with governments developing COVID-19 economic stimulus packages, now is the time to make real progress in our efforts to decarbonise steelmaking. As the world’s largest materials industry, steel needs to be at the heart of the heavy industry transition and green recovery plans.

Investment in decarbonisation technologies within heavy industries, like steel, tend to be costly with long payback periods, so government stimulus policies that lower the costs of green investment are urgently needed and critical for unlocking a faster transition.

Decisions made outside of the sector are also already impacting the future of steel. Automakers such as Volvo, Volkswagen and Toyota declared they want to eliminate carbon from their entire manufacturing process, which would mean any steel they use would need to be come from a decarbonised production process.

Likewise, investors have raised concerns that the steel industry needs to act now to safeguard its future in a low carbon world. Global consultancy McKinsey and Company found that 14% of steel companies’ potential value is at risk if they are unable to decrease their environmental impact.

Reaching net zero steel

Last week the International Energy Agency (IEA) released its long-awaited Iron and Steel Technology Roadmap. While the report includes some encouraging insights and analysis about how to decarbonise iron and steelmaking, the signals we’re seeing from industrial businesses indicate we could – and should – be mapping out a much bolder and ambitious plan for emissions reductions. Just recently ArcelorMittal pledged to be carbon neutral by 2050. As the world’s largest steel manufacturer, this is a major commitment and demonstrates the level of ambition we need to be seeing across the board.    

The technologies already exist for a net zero steel sector by mid-century, but we urgently need to speed up this transition. A growing number of businesses are engaged in this challenge and to bring them together, the Climate Group and ResponsibleSteel are working in partnership on a soon-to-be launched initiative called SteelZero.

SteelZero will follow the path of the Climate Group’s other successful business campaigns, with the support of ResponsibleSteel’s sectoral expertise. The mission is to unite a taskforce of forward-thinking leaders to drive a major shift in the global market for responsible sourcing and production of steel. Through this, we aim to make net zero steel the industry norm and support the various links of global value chains in this transition.

We’re looking for businesses across the steel sector to join us now to co-create and support a powerful commitment to sourcing steel in a net zero economy, alongside a roadmap of bold, ambitious action.

Pioneering the transition

As we move towards 2050, heavy industries will need to start making big strides towards full decarbonisation if we are to limit global temperature rise to 1.5°C. So it’s vital that steel-using companies start sending clear demand signals for responsible, net zero steel products as early as possible.

Paul King, Managing Director of Sustainability and Social Impact at Lendlease, a global construction company, and a big steel buyer, urges the industry to act now.

“We believe the sooner organisations take the time to understand the climate risks they face, the sooner they can take an informed seat at the table to shape the changes needed. By being an active participant in the inevitable changes, we can avoid unintended consequences.”

Companies like Lendlease have recognised that failing to act poses the biggest long-term cost risk to their business models. Instead Lendlease has found that the most effective way to manage cost is to build changes in over time, rather than rushing to adapt to changes in regulation after the event.

It’s also widely assumed that there’ll be greater scrutiny on industrial emissions in the future, with growing demand from consumers across business and government that the materials they use are sourced and produced responsibly. Getting ahead of this trend and acting now will prove advantageous and cost-efficient for manufacturers who are committed to climate action.

It’s clear that continuing on the current trajectory for the steel industry is not an option, but neither can we simply stop producing steel. In fact, global end-use demand for steel is projected to grow by almost 40% by 2050 under the IEA’s Stated Policies Scenario. At this critical juncture, we must speed up collaboration and accelerate the transition towards a responsible, net zero steel industry.

For more information on SteelZero please contact: Jim Norris at jnorris@theclimategroup.org

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