What is green steel exactly? Are there specific standards or criteria to be met?
Today, several definitions of “green”, “low-CO2” or “sustainable” steel are used interchangeably across the industry. When we talk about “green steel”, we often refer to the company-level commitments to encourage steel manufacturers to adopt climate-aligned decarbonization strategies. However, there is a need for an agreed set of standards to bring clarity to the market, corporates, investors, and policymakers.
At this time, we believe there is a value in focusing on a narrow definition of low CO2 steel, defined by a threshold of a tonne of CO2 per tonne of crude steel. Given long asset lifetimes, time is tight and deployment of solutions that cannot be easily adapted to align with net-zero pathways will pose a major problem in the coming decades. Therefore, we define true low CO2 steel as primary steel that emits less than 0.5 tonne of CO2 per tonne of primary crude steel and 0.1 tonnes of CO2 per tonne for 100% scrap steel with a sliding scale between depending on the ore-based vs scrap-based content. Such a threshold enables market players to distinguish between primary and secondary (scrap) production and breakthrough technologies from incremental improvements. This threshold is technically achievable; Hybrit in Sweden is targeting 25kg per tonne of fossil-free crude steel.
For the sector as a whole, the threshold should be tightened over time and in line with the necessary GHG reductions to align with the available carbon budget for the sector. Such a “sliding scale” methodology has also been proposed by Responsible Steel, who has recently suggested for consultation an ambitious A+++ standard, which encompasses not only climate intensity and climate criteria but also broader environmental, social, and governance criteria.
Does the technology exist to get us to fully green steel?
Steelmakers can take steps to reduce some of their emissions immediately. These “transitional” steps can include energy efficiency improvements such as top gas recycling, utilizing lower-emissions inputs where available (e.g., biogas, biochar), or switching to lower-emissions steelmaking processes (e.g., from blast furnace to DRI). Although these technologies are available today, they cannot eliminate all emissions. To (almost) completely remove emissions, breakthrough steelmaking technologies are needed that either avoid the carbon emissions in the first place through zero-carbon electricity and green hydrogen or manage the emissions using carbon capture technologies to capture and store or process emissions.
The good news is that, for the first time, the technologies are now in sight. This is a complete change from only three or four years ago, and significant technical and commercial progress has been made. Both incumbents and new entrants are developing low CO2 production technologies at pace: planned investments into low CO2 primary steel production capacity would see the first production in 2025 and would rise to 8.2Mt in 2026.
A portfolio of solutions is needed to decarbonize steelmaking, as different technologies will be cost-competitive in different locations. Access to low-cost, zero-carbon electricity, access to carbon capture and storage (CCS) infrastructure and sequestration sites, access to competitively priced natural gas, and proximity to an industrial cluster will shape the technology transition. The exact mix of steelmaking technologies in 2050 will depend on the price dynamics of key commodities, maturity timelines of different technologies, and the evolution of government policy.
Progress this decade is essential, and steelmakers are stepping forward
Is a hydrogen-based pathway the strongest case?
Our global analysis suggests production technologies using 100% green hydrogen could represent 40%–55% of primary steel production in 2050, utilizing 35–55Mtpa of zero-emissions hydrogen. This assumes decision making that seeks to minimize the total cost of production and maintains asset investment cycles of existing plants. Hydrogen steelmaking could become competitive with carbon capture, utilization, and storage (CCUS) technologies when prices for zero-carbon hydrogen hit US$2.20–US$2.90/kg, which the Energy Transitions Commission (ETC) and other leading analysts anticipate happening in the 2020s.
To compete with unabated steelmaking processes in the absence of carbon pricing or other support, hydrogen prices would need to reach US$0.65/kg. Supporting the growth of hydrogen-based steelmaking could help drive down the cost of zero-carbon hydrogen production, unlocking its use in a wide range of other industrial applications where direct electrification is challenging. A single steel plant with an annual capacity of 5Mt could utilize at least 300Kt of hydrogen, absorbing the output of 5GW of electrolyzers.
What is the steel industry doing?
Progress this decade is essential, and steelmakers are stepping forward. Steel producers representing 20% of global primary production capacity, including half of the world’s ten largest producers, have set ambitious emissions reduction targets. These targets reflect each company’s asset base, technology portfolio strategy, technology commercialization timings, and location-specific resource circumstances.
Major steel-producing and consuming regions, including the EU, the U.S., South Korea, Japan, and China, are also committed to climate targets that will necessitate investment in low-carbon steelmaking. This ambition has translated into a growing number of announcements for pilots and demonstration projects for breakthrough low-CO2 steelmaking technologies. However, steelmakers cannot decarbonize the sector on their own. Moving from technology validation to commercial-scale deployment of new technologies requires a strong business case for investment, which calls for collaboration across the steel value chain and supportive finance and policy environments.
What are the economics behind green metals? Is it financially sustainable to mine, refine, and use?
In the near term, there is undoubtedly a challenge in producing green metals in competitive wholesale markets and where prices must be competitive in regional and global markets. At the same time, three trends are eroding the view that green metals will never be cost-competitive. Firstly, policymakers are actively developing measures that enable low CO2 domestic production to be competitive in wholesale markets exposed to international competition. Secondly, major financial institutions are increasingly scrutinizing the degree of climate alignment of their portfolios and investments. Thirdly, key end-use markets are evaluating potential “green premiums” for materials that can help address upstream emissions and can offer competitive differentiation. For these reasons, it’s likely that the economics of green metals will grow more and more compelling over time.
Who do you see leading the way with this?
In the mining sector, The International Council on Mining and Metals (ICMM) has shown reinvigorated leadership with its members committing to net-zero scope and greenhouse gas (GHG) emissions by 2050 or sooner, in line with the ambitions of the Paris Agreement. The ICMM has also committed to accelerating action on scope 3 GHG emissions and will set targets by the end of 2023 that will focus on the decarbonization of the supply chain. This agreement is significant because it brings together one-third of the global mining and metals industry – including more than 650 sites in over 50 countries, which will drive emissions reduction at a significant scale.
Similarly, the Net-Zero Steel Initiative (NZSI), part of the Mission Possible Partnership, aims to put the global steel sector on a path to net-zero emissions by mid-century. It brings together high-ambition steel producers – alongside energy and iron ore suppliers, equipment suppliers, and buyers, and in close collaboration with financial institutions and policymakers – to pursue a unique end-to-end supply chain approach to decarbonization. The Initiative provides a platform for these stakeholders to align on a net-zero transition pathway for the industry and intends to shape a favourable environment to invest in decarbonization solutions, underpinned by supportive policy frameworks, rising demand for low-emissions steel, and financial flows towards the steel transition.
Cross-sector collaboration within and across sectors can accelerate technological innovation, infrastructure development, sound policy formulation, demand aggregation, and capital formation breakthroughs. All of these are critical to achieving net zero by 2050.
Alasdair Graham is Head of Industry Decarbonisation, Energy Transitions Commission and Head of the Net-Zero Steel Initiative (NZSI). The NZSI, part of the Mission Possible Partnership, aims to put the global steel sector on a path to net-zero emissions by mid-century.
