The European steel industry has less than 26% of its carbon budget remaining and will surpass it by 2035, meaning the industry will not be able to reach net zero emissions if significant changes aren’t made quickly, according to a new report from Industry Tracker.
The steel industry’s existing carbon assets are predicted to release 2.3 billion metric tons of carbon dioxide by 2035 despite a budget of 3 billion metric tons of CO2 release by 2050. The report, titled Steeling for Net Zero, says the industry must shift its business model and change technologies, some of them centuries old, to readjust to the carbon neutral plans.
Companies have until 2033 to stop using current steelmaking methods and to invest in new production technologies, the report says. The cost of that transition could range from $4 billion to $34 billion.
The report assessed 10 of the largest steel companies in Europe. They account for 68% of the steel production on the continent. Eight of the 10 companies analyzed in the report have emissions reduction targets, but three of the companies in the report have already exceeded their emissions budgets.
Net zero goals in the steel industry are a huge prioritization worldwide as steel is one of the largest contributors of emissions across industries. The report says steel production makes up 9% of total global emissions. Other accounts such as one from the Global Efficiency Intelligence have the steel industry accountable for as much as 11% of the world’s total CO2 emissions.
The United Nations Clean Energy Ministerial also recently laid out plans for its Industrial Deep Decarbonization Initiative. It aims to develop a global strategy for coal decarbonization by 2050.
SSAB and ArcelorMittal rank the highest in their transition preparedness while Severstal, Metinvest and Erdemir are the least prepared, according to the report.
SSAB has the most ambitious carbon neutral goal of the companies examined by Industry Tracker. The Swedish company plans to be carbon neutral by 2045. SSAB says it currently accounts for 10% of emissions in Sweden and wants to cut 35% of its emissions by 2032.
Additionally, ArcelorMittal, Voestalpine, Tata Steel and Salzgitter have made commitments to be carbon neutral by 2050. Although the report says most of the cuts that are a part of these goals will come after 2030 putting thecompanies at risk to miss a window in investing in new technologies that are necessary to make those goals a reality.
The analysis does show that some European steel companies, including SSAB, ArcelorMittal and Tata Steel, are starting to develop low-carbon improvements needed to help reduce their carbon footprints. That includes hydrogen-based steel production, which can reduce emissions to near net zero, as well as carbon capture utilization and storage, which could help cut emissions from traditional forms of steelmaking.
Seven of the companies in the report are developing green hydrogen production and are creating supply chains to have access to high amounts of hydrogen needed for the new technologies. The report says these efforts are still in the early stages and the finances are still not there to support the cost of the transition and will likely need to come up with ways to fund these projects including the use of subsides, public funding and investment capital.
The biggest emissions contributor in steel production is from the blast furnace, which has been used since the 14th century. The repot says until this primary method is replaced there is no way to reduce emissions enough to meet the EU’s 2050 net zero target. The report says emissions reductions from efficiency improvements have plateaued over the past two decades and the companies analyzed in the report have reduced their emissions by an average of 1% per year over that time.
Blast furnaces can be used for 15-20 years and upgrading them can be expensive, meaning steel companies are committed to the carbon-intensive production methods and need to invest in new technologies to transition to cleaner manufacturing, the report suggests. The analysis says the companies will need to stop renewing blast furnaces before 2030 to have a chance at hitting net zero goals.