The European steel industry has less than 26% (12-35%) of its carbon budget remaining and companies must rapidly shift their business models to reach net zero.
This is according to a new report from climate research company, Industry Tracker.
The report suggests that the industry’s existing assets could release 2.3 billion tonnes of CO2 in their lifetime, compared to a 2050 budget of just over 3 billion (based on the IEA’s Net Zero Emissions scenario).
The Steeling for Net Zero report highlights that emissions from steel now account for up to 9% of all global emissions – more than the whole of India – and demand for the metal is on the rise.
The biggest contributor to emissions from the steelmaking process comes from the blast furnace, said Industry Tracker in a statement. Blast furnaces have a long life cycle of about 15-20 years before they need upgrading, an expensive process that prevents furnaces from being shut down prematurely without incurring write-offs. This risks companies getting locked in to carbon intensive methods unless they start investing in new technologies and timing their transition correctly.
Key report findings:
- Companies will need to stop renewing blast furnaces before 2030 and have between now and 2033 to begin investing in new technologies, including green hydrogen steelmaking.
- Companies have collectively used up three quarters of their 2050 carbon budget, and in a worse case projection, 3 companies have already exceeded their budget from locked-in emissions.
- 8 of the 10 companies analysed have emissions reduction targets, however, most of the emissions cuts outlined in these targets come after 2030, when they are at high risk of missing the window for investing in vital new technologies.
- Some of the leading European steel companies are starting to develop the low-carbon innovations required to significantly reduce their footprint. This includes hydrogen-based steel production and CCUS.
- 70% of the companies in the report are involved in projects developing “blue” or “green” hydrogen production. For the most part, however, these technologies are still early stage, and they must be rapidly scaled and commercialised to meet global climate targets.
The current balance sheets and cash flows of these steel companies are not sufficient to support the cost of the transition. This means companies must leverage partnership opportunities, whilst subsidies, direct public funding and investment capital must be made available.
Carole Ferguson, Managing Director of Industry Tracker, commented: “Steel is used across many products and sectors that are integral to the way we live. However, with a large carbon footprint and a growing emissions profile, steel remains a problem child in the path to net zero.
“With momentum starting to build for new technologies, particularly green hydrogen, steel companies have the opportunity to break out of their current capital intensive business models. I am optimistic that with public support, cross sector partnerships and investment capital seeking to solve the climate crisis, steel companies have the potential to lead the way in the transition and drive the green hydrogen economy.”
The report is available for download.