The ubiquitous nature of steel with its applications spanning across diverse sectors be it buildings, infrastructure, vehicles or consumer durables, makes it critical to tackle emissions originating from its production. The steel sector contributes to 7 per cent of the global energy sector carbon dioxide (CO2) emissions and countries across the globe are aggressively pursuing strategies that result in deep decarbonization of this sector.
Global steel production methods can be broadly classified as Blast Furnace/Basic Oxygen Furnace (BF/BOF), Electric Arc Furnace (EAF) and Direct Reduced Iron (DRI) EAF having a share of 71 per cent, 24 per cent and 5 per cent respectively. Amongst the three, EAF is the most environment friendly in terms of emissions as it makes use of scrap steel whereas the other two involve the use of iron ores. Nevertheless, the EAF production method can only reap limited benefits. While it embodies the principle of material recycling and is less emission intensive than its counterparts, countries have been struggling with limited steel scrap supplies. Moreover, there are certain applications that require high grade steel quality, something that cannot be catered to by the EAF production method. There are of course a number of other technologies that are in the process of being developed that include the likes of coupling BF/BOF with Carbon Capture Utilization and Storage (CCUS) or using hydrogen as a reducing agent instead of coking coal, replacing natural gas use in DRI-EAF with green hydrogen and so on.
“Green steel” is the new buzz word that has been making the rounds off-late, however it lacks a universal definition. One of the cases of successful production of green steel (in the truest sense) is by the joint venture between SSAB, Vattenfall and LKAB that has recently launched the world’s first ever fossil fuel free steel. In fact, pre-orders to the tune of 1.5 MT being signed off by H2 Green Steel, for green steel production that will take place post 2025, hints at the willingness of consumers to pay a premium for purchasing low emission steel. Similarly, some of the leading car manufacturing companies such as Mercedes Benz and Volvo have announced their plans of using green steel for producing future car models.
Being a globally traded commodity with multiple end use applications, it is critical that decarbonizing the steel sector be accorded utmost importance at multiple international forums to ensure mutual benefits for all participating members. This is particularly true when taking into account embedded emissions, with steel being one of the primary inputs in multiple industrial applications. With the world racing to limit global temperature rise within 1.5º Celsius, cleaning up what is considered to be one of the “dirtiest” industries in the world is not going to be an easy task. In this regard, the role of international forums such as the G20 becomes pronounced.
According to the World Steel Association, nine out of the ten leading steel producers in the world are G20 member countries comprising of players such as China, India, Japan, Russia, US, South Korea, Germany and Brazil. In addition, manufacturers from countries like EU, UK, US, Germany and Canada have committed to “making near zero steel the preferred choice in global markets” during the COP 26 deliberations. In light of the common interest of the aforementioned countries, there are a few action items that could be taken up as part of India’s G20 Presidency.
First, there needs to be a consensus on how one would define green steel. Would it be limited to only carbon free products or would it allow for variants that are accompanied by lower emissions than the most polluting conventional route?
Second, in the absence of fully commercialized green steel making technologies, G20 may consider introducing grades of “green” steel that vary in terms of their carbon emissions. Assuming “green steel” would follow the same nomenclature as “green hydrogen”, countries may consider, easing into the “greening process” by allowing for “clean steel” and its products that need not be completely carbon free. These may be granted preferential treatment as far as international trade is concerned. Of course, this will also require common standards for traded products that are mutually agreeable to all. However, this is to be treated solely as a stop gap arrangement till such time that a cheaper and greener alternative arrives. Moreover, owing to the heterogeneity of steel production both in terms of technology used and size of producers (within and across countries), it is natural to expect that a “one size fits all” strategy will not be applicable. This further underlines the need for introducing emissions graded variety of steel, that was alluded to earlier on
Third, a closer look at the firms that have announced “green steel” projects reveals that these tend to be limited to the larger players like Thyssenkrupp, ArcelorMittal, Vedanta etc. of the world. However, developing countries like India rely on the Micro, Small and Medium Enterprises (MSME) for a substantial portion of their steel output. In fact, India’s National Steel Policy envisages the MSME sector to play a key role in meeting the target of producing 300 MT of steel by 2030. Such firms lack the means and knowledge to experiment with low emission production methods. This warrants the need for undertaking concerted efforts to equip these players with the wherewithal to ascend towards greener production. One way of addressing this is to emulate the workings of the Climate Technology Centre and Network (CTCN) introduced under the aegis of the United Nations Framework Convention on Climate Change (UNFCCC). That is, to create a resource base comprising of technical and financial experts who can lend their support to participating firms in the Business 20 (B20) working group, seeking guidance on decarbonization solutions.
Fourth, steel manufacturing machinery have long asset lives and in countries like India, the production fleet has only covered 1/3rd of its asset life. This implies that any changes in infrastructure will not only be capital intensive, but will possibly dictate the future emission patterns of manufacturing firms. Therefore, in the short to medium term, while moving towards low carbon steel production, the aim should be to avoid technology lock-ins and strive for seamless integration of such production methods. Complete overhauling of production infrastructure (if deemed necessary) would need to be backed by sound research and adequate financing sources. Owing to the expansive agenda at hand, there is a case for encouraging cross learnings between efforts being steered by multiple forums involving diverse stakeholders. For instance, while the G20 may be more focussed on the policy angle, proceedings under the Clean Energy Ministerial (CEM) and Mission Innovation (MI) are more action oriented. A case in point is the Industrial Deep Decarbonization Initiative (IDDI) under CEM which calls for a global drive for procuring green steel and the Net Zero Industries Mission (to be launched later this year) under MI.
(Views expressed are the author’s own and don’t necessarily reflect those of ICRIER)
