Decarbonizing the Steel Industry: Challenges and Investment Strategies
Introduction
One of the fundamental building blocks of modern society, steel is used in many facets of our daily life as one of the most significant engineering and construction materials. The steel sector is currently one of the top three carbon dioxide producers. As a result, steel producers around the world are having to contend with a decarbonization challenge to minimize their carbon footprint from an economic and environmental standpoint.
The adoption of the Paris Agreement by 190 countries in 2015 marked a significant advancement in the international response to the problem of climate change. The three major polluters, China, India, and the United States, were not among the approximately 60 nations. According to a UN report, several countries, including the UK and the EU, have pledged to becoming carbon neutral by 2050. (except for Poland). Additionally, some countries have promised to work toward early deadlines. These accords taken as a whole have increased the pressure on all industrial sectors to seek decarbonization. In 2018, the average amount of carbon dioxide released per ton of steel produced was 1.85 tons, or about 8% of the world’s total emissions. As a result, steel producers around the world, particularly in Europe, are having to deal with an issue related to decarbonization.
In 2019, the manufacturing of BF-BOF steel and EAF steel combined to emit about 3.1 Gt and 0.5 Gt of CO2, respectively. EAFs in China and India have high CO2 intensities because they use a substantial proportion of pig iron or coal-based direct reduction iron (DRI) as feedstock rather than steel scrap, which increases the CO2 emissions from all EAFs globally.
Based on the total worldwide GHG emissions shown above and the 52 Gt CO2-e in 2019 (which also includes non-CO2 GHG emissions) published in the UN Emissions Gap Report 2020, the global steel sector is responsible for around 7% of all GHG emissions. Based on the overall CO2 emissions from the steel sector as shown above and the 33 Gt CO2 in global CO2 emissions published by the IEA in 2019, the steel industry is responsible for 11% of the total global CO2 emissions. It is important to note that only China and the United States have annual GHG emissions higher than the global steel sector.
Investment strategy for Steel Industry Decarbonization
Installing carbon-capture machinery at existing steel factories is one way to decarbonize the steelmaking process. This would enable steel manufacturers to keep operating their facilities without harming the environment. Projects to capture carbon at steel mills are still in the pilot stage. To bring down the price of carbon capture to a point where it can be used as a large-scale solution, there will undoubtedly need to be a lot more investment.
In order to construct 975 MW of solar and wind producing capacity in Andhra Pradesh, India and Greenko, the nation’s top energy transition company, struck a partnership in March 2022. By integrating the project with Greenko’s hydro pump storage facility, the goal is to get around the intermittent nature of solar and wind power and provide 250 MW of continuous, renewable energy to AM/NS India, An Indian steelmaking joint venture with Nippon Steel.
The first substantial decarbonization project outside of Europe was announced by ArcelorMittal and the Canadian government in July 2021, and it involved investing CAD$1.8 billion in decarbonization technologies at ArcelorMittal Dofasco’s factory.
Conclusion
There are many obstacles in the way of closing the implementation-ambition gap. Scaling up innovative technologies, investments, competitiveness, providing a level playing field, creating markets for steel with almost no emissions, securing strategic inputs, and tackling associative issues are a few examples. The decarbonization of steel is a global issue that requires a worldwide solution. Collaboration between nations and between public and commercial stakeholders will be necessary to hasten the transition to a net-zero pathway. The OECD steel policy community, which brings together governments and business, is prepared to support the implementation process and to promote synergies with already-existing steel decarbonization programmes.
Author: Divyansh Tiwari