By Drew Fryer
To add to the many problems already facing the steel sector, a new report this week from the Carbon Disclosure Project (CDP) shows that a failure to invest in low carbon technology by the steel sector has left it woefully underprepared for a tougher climate regime.
The steel industry is responsible for up to 7% of global emissions. Over the last decade, the industry’s greenhouse gas emissions and energy consumption per tonne of steel produced have flatlined according to World Steel Association figures. Unlike a number of other sectors, for steelmakers there are no commercially available technologies today that will enable the sector to achieve the deep decarbonisation needed to meet climate targets set out by the Paris Agreement. The agreement to limit warming to 2 degrees implies a need for the steel industry to reduce its emissions per tonne of steel by 70% by 2050.
The CDP report for investors, covering 14 of the largest steel companies reveals that over 40% of those companies have not published any emissions reduction targets beyond this year, and all company reduction targets are set to expire by 2020. The threat to the industry is urgent as over 70% of world steel production will be subject to a carbon price by the end of 2017 including from emissions trading schemes, carbon taxes or climate-focused coal taxes.
Not all bad news
Despite the lack of emissions reductions at sector level, there are a few leaders and projects identified by the report which may show the way forward. The use of carbon capture and storage (CCS) is seen by organisations like the IEA as a vital part of reducing the steel sector’s emissions and several steelmakers have developed technologies that might help enable capture of emissions. These include POSCO’s FINEX technology and the HIsarna technology developed by Tata Steel. But more progress on CCS is urgently needed, as there are still no CCS pilot projects live and operational anywhere in the steel industry.
Other steelmakers including ArcelorMittal, China Steel and ThyssenKrupp are also focusing on carbon capture and utilisation (CCU) that could see steel waste gases transformed into usable chemicals and biofuels. Others still aim to eliminate process emissions altogether, rather than capture them. Swedish producer SSAB recently announced a long-term breakthrough research project, to develop a hydrogen-based steelmaking process using renewable energy that would emit water not carbon dioxide.
However, such innovations are the exception not the norm, and most are at feasibility or piloting stages and not technically or commercially proven. Meanwhile, R&D expenses in companies assessed in the CDP report have been cut by 14% in US dollar terms in the last five years.
With steel such a major contributor to global emissions, and regulators tightening climate regimes in the wake of the Paris Agreement, the sector needs to urgently increase funding of a technological transformation or risk feeling the heat of a changing climate regime.
Drew Fryer is a senior analyst, investor research at CDP
