Whether we agree with the rationale or not, the carbon footprint of everyday materials like steel and aluminum is becoming an increasingly important component of consumers’ purchasing decisions.
In the US, some states — like California — have mandated purchasing departments for state projects to report the carbon footprint or CO2 content of the products they buy. The move aims to measure and, if possible reduce, carbon content.
But in the US such moves are still patchy and largely state-led. Meanwhile, meaningful direction from the new Biden administration on the issue is still largely in development.
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Europe aims to reduce emissions
In Europe, the EU is coordinating moves to reduce greenhouse gas emission by the steel sector. The EU is providing funding for research and support in the form of infrastructure, such as hydrogen gas supply networks.
In a recent post, our ex-colleague Jeff Yoders wrote a fine piece on efforts by ArcelorMittal to commercialize reductions in the carbon content of an initially small proportion of its output — just 2% or 600,000 tons per annum — by issuing certificates, which certify the reduction in carbon footprint of their steel that can be used by customers who need to report the carbon content of their supply chain or those that face carbon taxes.
The vouchers allow buyers to show an offset of Scope 3 emissions, which can come from anything in a company’s value chain.
The internationally developed accounting procedure called the Greenhouse Gas (GHG) Protocol categorizes greenhouse gas emissions into three groups, or “scopes.”
Scope 1 covers direct emissions from owned or controlled sources. Meanwhile, Scope 2 covers indirect emissions from the generation of the reporting company’s purchases of electricity, steam, heating and cooling. Lastly, Scope 3 includes all other indirect emissions that occur in a company’s value chain.
ArcelorMittal will achieve certifiably lower emissions in a number of ways, the post reports. That includes identifying material from electric arc furnace (EAF) production powered by electricity from renewable sources. It also includes using only coking coal made from biomass and by capturing emissions and recycling them in a microbial process into chemicals to be used in making plastics and fuels.
The EU is supporting the initiative in a number of countries with funding for research. It is also providing hydrogen supply infrastructure to ArcelorMittal’s Hamburg facility making steel as a direct reduction from iron ore.
Consumers under pressure
Plenty will decry the use of state funds to support such moves. Some will suggest it’s a lot of hot air that will result in wasted investment that is not being demanded by the market.
However, there is plenty of evidence that industrial consumers are under investor pressure to report and reduce the carbon footprint of their supply chain. In addition, they are also looking to use measures of low-carbon intensity as a sales and marketing tool to a public increasingly willing to make purchase decisions on the basis, at least in part, of their perceptions of a company’s impact on the environment.
Volvo, for example, has teamed up with Swedish steelmaker SSAB on the production of “fossil-free” steel automobiles. SSAB will start supplying the first fossil-free steel, based on electricity from renewable energy and green hydrogen, in 2026.
Steelmakers around the world seem, in varying degrees, to be earnest in their intent to reduce the carbon content of their product.
But the challenge is immense.
After electricity production, iron and steel is the second-largest source of carbon emissions. Iron and steel account for some 7-9% of all carbon emissions, according to a recent Financial Times article.
A move to EAF production — responsible currently for about 30% of global steel production — would help. However, there is simply not enough steel scrap to move all steel production to the EAF technology.
Long way to go in China
A larger share of Chinese steel, which in itself is over half the global output, comes from the traditional blast furnace route. Although many of the mills were built in the last decade or so, they still compare poorly from an emissions perspective to Western mills.
China’s mills are responsible for about one-third of the country’s industrial emissions. The sector still produces two tons of CO2 for every one ton of steel. That compares to usually only one ton in Europe.
The European steel industry has seized upon that fact to push for carbon taxes on Chinese steel as a measure to limit imports and increase pressure to improve production processes in China.
Green steel comes from the source
Fundamentally, though, the blast furnace production route can only be made carbon neutral by using hydrogen as the fuel or heat source. For that hydrogen to be fossil-free (i.e., “green hydrogen”) from renewable electricity would require a massive ramp-up in renewable capacity.
In Germany, this comes to 20% of the whole country’s current electricity consumption. It would only be economically viable at a carbon tax of $220 per ton, the Financial Times says.
SSAB agrees. The steelmaker says its own endeavours will result in steel that is at least 20-30% more expensive than current production routes.
Clearly, so-called green steel is not going to be widely available anytime soon.
However, multiple countries and companies are investing hard dollars to achieve it. Furthermore, in large part, the public is supportive.
How supportive it will be when it sees the costs is unclear. But as we saw with wind turbines and electric cars, a mix of state support and early-adopter enthusiasm gradually gets new technologies off the ground. In turn, that allows technology and economies of scale to whittle away at the costs. Green steel is here to stay and will likely follow a similar long-term growth path.
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