Decarbonizing the steel industry
Solutions to the sector
The steel industry’s transition to net-zero is contingent on a massive shift away from coal to electricity. Specifically, by producing hydrogen as an alternative fuel to coal and powering scrap-based electric arc furnace production. This transition requires upstream production of hydrogen and electricity to become fossil free.
The steel sector should not add or invest in more coal-based steelmaking technologies, and instead phase them out to avoid early retirement and stranded assets.
Steel scrap plays a vital role in the decarbonization of the steel industry; due to steel’s excellent circular properties, steel scrap can be used to produce new steel, curbing industry emissions and resource consumption. Every tonne of scrap used for steel production prevents the emission of 1.5 tonnes of CO2, as well as the consumption of 1.4 tonnes of iron ore and 0.74 tonnes of coal, according to the World Steel Association. Scrap is generated by recovering steel from buildings, infrastructure, vehicles and other products at the end of life.
Though it is estimated that around 85-90% of steel scrap potential is recovered at the end of life, more could be done to achieve higher recovery rates through material efficiency and improvement of the recovery system. Furthermore, producing steel from steel scrap uses mainly electricity, and therefore it could emit significantly less emissions — or even zero emissions — if clean electricity from wind and solar is used to power steel production through steel scrap.
Electricity demand in the steel sector will quadruple by 2050 as steel’s transition to net zero hinges on a massive shift from coal to electricity. An affordable and reliable electricity source is fundamental to competitive zero-carbon steelmaking. Increasing fossil fuel prices and decreasing renewable energy costs will favor the green hydrogen based steel production route. Solar and wind power has become cost-competitive with fossil fuels even without financial support. According to the IRENA, the cost of solar PV and onshore wind power generation fell by 89% and 69%, respectively, between 2010 and 2022. Renewables can protect the steel industry from fossil fuel price shocks, avoid physical supply shortages and enhance energy security. This should be done through on-site generation, power purchase agreements (PPAs), and direct investment.
False solutions and myths
Global Energy Monitor, Pedal to the Metal 2023, July 2023
Agora Industry, Wuppertal Institute, 15 Insights on the Global Steel Transformation, June 2023
The Institute for Energy Economics and Financial Analysis, No, metallurgical coal is not a critical material… and carbon capture won’t save it, July 2023
Centre for Research on Energy and Clean Air, Solutions for Our Climate, Unveiling the Truth Behind Blast Furnace Pollution in South Korea, November 2022
InfluenceMap, The Japanese and South Korean Steel Sectors & Climate Policy, April 2022
Lead the charge, Hyundai’s Award-Winning Ioniqs: Failing To Answer The Call For Sustainable Supply Chains, April 2023
SteeWatch, Sunsetting Coal in Steel, June 2023
Fatih Birol, Clean energy is moving faster than you think, April 2023