The world is racing toward net-zero. Governments around the world are taking measures to significantly reduce greenhouse gases, such as transitioning to renewable energy or electrifying vehicles. To reach the net-zero goal by 2050, abundant wind turbines and solar panels must be built, among other things.
The steel and cement industries are responsible for about 10% of the world’s CO2 emissions
The foundation for the green transition is built of steel and cement. And this is where the dilemma lies: the steel and cement industries are responsible for about 10% of the world’s CO2 emissions. Steel production uses billions of tons of coal every year. Thus, it is essential for the net-zero goal that steel production is decarbonized.
So how can steel go green?
First, a large amount of capital is needed and second, important technological hurdles must be overcome. In addition, there is probably the biggest problem: green steel is much more expensive than coal steel.
At the moment, steel production uses coal-fired blast furnaces. The simplest alternative to replacing coal would be an adequate one such as biomass. However, since burning biomass also produces CO2, this must be recaptured. Europe’s largest steel producer ArcelorMittal from Luxembourg is the first steel producer to produce steel with biomass.
The problem here, however, is the availability of biomass. There is simply not enough to supply the entire steel industry. Especially since other industries also use biomass, such as the production of biofuel.
The other alternative is green hydrogen. This could be the cleanest way to produce steel. The first green steel produced with hydrogen comes from the Swedish steel producer SSAB.
SSAB has partnered with Volvo to use green steel for their vehicles. Green hydrogen sounds good on the one hand, but this alternative requires immense investments. Steel producers would have to convert their coal-fired blast furnaces to use hydrogen. In addition, the green hydrogen industry is still in its infancy and almost non-existent. This barrier has to be overcome before green hydrogen can be used on a widespread basis. But here again, lies a problem. A lot of energy is needed to produce hydrogen. To be more precise, it takes green electricity to produce green hydrogen. And this should be done as efficiently as possible. At the moment, however, the reality is that more energy is needed to produce hydrogen than can be supplied later. About one-third of the energy is lost due to conversion losses.
To make steel truly green, however, the foundations still need to be laid. It is important that especially the steel producers give the commitment to decarbonization. In addition, incentives and regulations must be created by the government.
The first steel producers have already made their commitments to be carbon-free by 2050. These include ArcelorMittal, Nipponsteel, and, most importantly, the world’s largest steel producer Baowu from China. China will be particularly important, as China produces more than 50% of the world’s steel. Without the commitment from China, the decarbonization of the steel industry will hardly take place.
But the main problem remains: green steel is much more expensive than coal steel.
It is up to the governments to take measures to make the production of green steel more attractive. Incentives and regulations must be created. The regulations must lead to the choice of green steel as far as possible when it comes to the purchase price. To what extent this is feasible remains to be seen.
In the end, there are still important hurdles to be overcome before green steel becomes a reality. In particular, all parties must be involved. Without appropriate measures from all stakeholders, there will be no decarbonization of the steel industry.
2 thoughts on “ESG Special: Green Steel”
Put taxes and embargoes on carbon steel. Subsidies and tax breaks for green steel.
The EU is supposed to do something similar with its EU Green Deal. This should for example include tariffs on polluted imports and high carbon prices… In order to stop carbon emissions on a macro level, China must also commit to this.