How Steelmakers Are Reducing Their Carbon Footprint

Decarbonizing the steel industry is essential to meet climate goals and address the rising demand for green steel from industries such as transportation.
Steelmakers are using breakthroughs such as green hydrogen, electrification, and carbon capture, use, and storage (CCUS) to reduce carbon emissions.
Significant capital investment, availability of low-cost renewable energy, and market adoption remain key challenges towards steel’s decarbonization.

July 28, 2023 | Market Intelligence

The traditional steelmaking process, which uses coal and other fossil fuels, results in a considerable amount of CO2 emissions, and accounts for up to 7-9% of global carbon emissions.

“Green” steel strives to reduce the bad environmental effects of steel production by using clean energy sources.

Steel makers are switching to new techniques to reduce emissions. These include:

1. Electric arc furnaces were traditionally used for scrap steel. However, Boston Metal has developed a technology that uses electricity to transform iron ore into molten iron, with oxygen as a byproduct.

2. Green hydrogen is now replacing coal in blast furnaces and producing water, instead of CO2, as a byproduct.

3. Carbon capture, use and storage (CCUS) is being used to safely store or repurpose carbon produced during steelmaking to create new products.

4. Less carbon-intensive fuels such as natural gas and biomass is also being tested to marginally reduce emissions from steel production.

The rising demand for green steel from automakers and equipment providers puts pressure on suppliers to provide more low-carbon, recycled, or sustainable steel.

Automakers are facing regulation on life cycle and are keen to showcase their environmental credentials as they roll out a new generation of passenger electric vehicles.

Volvo Trucks has already purchased SSAB’s first batch of fossil-free steel. Mercedes Benz too has signed an agreement with H2 Green Steel for 50,000 tons of steel made with hydrogen.

How Steelmakers are Decarbonizing

Sweden’s SSAB AB has launched SSAB Zero, made from recycled scrap in a renewable-powered electric arc furnace, with the aim to sell 100,000 tonnes of SSAB Zero a year by 2025.

H2 Green Steel AB received authorization in June for a new factory in Sweden.

Rio Tinto Plc and China Baowu Steel Group Corp are looking to set up green steel facilities together in China and Australia.

Nippon steel plans to boost hydrogen use in its blast furnaces while ArcelorMittal SA is looking to use green hydrogen in an iron ore processing unit to be built in Spain by 2025.

Fortescue Metals Group Ltd., Mitsubishi Corp. and Voestalpine AG are collaborating to develop zero-carbon steel at a plant in Austria by replacing coal furnaces with hydrogen and an electric smelter.

Global Efforts in Reduce Steel Industry Emissions

The U.S. leads the world in green steel transition, having already implemented electric arc furnaces -- a less carbon-intensive approach.

Companies in the U.S. are now looking to benefit from the prospective green hydrogen subsidies under the Inflation Reduction Act and improved access to cheaper renewable energy.

Companies in Europe are facing more regulatory pressure as policies and net-zero goals drive a transition to more environmentally friendly operations, such as an agreement to phase out free carbon allowances by 2034 and a carbon border tax on imports based on the amount of carbon generated in their production.

China and India, which together account for two-thirds of the world's steel emissions, continue to rely heavily on coal. They have made their decarbonization plans more focused, but the speed will likely depend on how well they can balance economic development with their climate responsibilities.

Also Read: Can Steel Reduce its Carbon Footprint?

Key Challenges Toward Green Steel Transition

Decarbonized steel manufacturing requires a capital expenditure injection of more than 2-3 trillion euros before it can be produced at a commercial scale.

Europe would need to invest nearly $130 billion (before grants) to boost power generation by 8% and produce around 5 million metric tonnes of green hydrogen for the green steel transition.

Factors such as the availability of low-cost renewable electricity locally or the presence of hydrogen transport infrastructure, including pipelines and ports, will be crucial for steel industry competitiveness.

The market adoption rate of green steel may also be impacted by price-sensitive consumers who may not be ready to bear the increased production costs of the material.

H2 Green Steel has stated that its steel will come at a 25% premium, while SSAB has said its fossil-free steel will cost 300 euros ($325) per tonne more than untreated steel.

Countries in the Asia-Pacific region are substantially increasing their blast furnace capacity without investing the same amount in carbon capture or mitigation. To encourage fair competition between green and conventional steel, effective policies, tailored subsidies, and carbon pricing are needed.

Conclusion

Decarbonization will necessitate large capital expenditure, but regulatory restrictions might result in more expenses for companies that fail to transform.

Collaboration between governments, businesses and other stakeholders will be necessary to meet the technological, financial, and legal problems associated with decarbonizing steel manufacturing.

Author: Manasi Baswe