Back
Steel is one of the world’s most traded commodities, with roughly one-third of the global supply crossing borders. That makes decarbonizing the carbon-intensive sector a challenge when different companies or governments rely on disparate criteria to determine the amount of emissions to attribute to a ton of steel.
That’s now changing. On Friday, two major industry associations in China and Europe each signed onto landmark agreements with the Australian nonprofit ResponsibleSteel to set internationally coherent standards for what qualifies as green steel. Together, the three organizations represent around 60% of global steel production.
On the face of it, green steel seems easy to tell from the dirtier variety. If iron is made in a direct-reduction facility that uses a zero-carbon fuel such as green hydrogen, and that iron is transformed in an electric arc furnace powered by clean energy, then the resulting steel is unequivocally green. But factories that meet those specifications are virtually nonexistent, given the high cost and limited availability of green hydrogen.
Early next year, the European Union will start charging levies on imports based on how much planet-heating pollution was produced in their manufacturing — a policy called the Carbon Border Adjustment Mechanism, or CBAM. But it will be a struggle to determine how high the tariff should be on steel that wasn’t made with green hydrogen but didn’t come from a coal-fired blast furnace.
“When you’re measuring emissions from steel, how do you measure natural gas and coal that’s used? Are you including upstream emissions? Are you counting coproducts you might not sell as steel but as cement?” Annie Heaton, the chief executive of ResponsibleSteel, said Friday on a call from outside the United Nations climate summit in Belém, Brazil. “You need transparency, otherwise you can get a 20%, 30%, even 40% difference between different kinds of clean steel.”
The two agreements with ResponsibleSteel are separate, bilateral deals with each regional group, the China Iron and Steel Association and the Brussels-based Low Emission Steel Standard organization.
The watchdog group SteelWatch, which was not involved in the agreements, praised what it called “technical folk doing the wizardry for interoperability.”
“Decarbonization of steelmaking is hampered by lack of disclosure, inconsistent data, and a confusing array of standards,” SteelWatch’s executive director, Caroline Ashley, who is based in the United Kingdom, said over email. “It is a positive step forward that the decarbonization standards of these three organisations — one Chinese, one European, and one global — are aligning.”
China and Europe are the most obvious markets in which to start this process. China produces more than half the world’s supply of steel, and Europe’s CBAM promises to remake the continent as the first major destination for lower-carbon versions of the metal. Just this month, Germany’s national rail company, Deutsche Bahn, launched a pilot program to acquire green steel for its tracks. Over the summer, a major Chinese steelmaker promised to send a debut shipment of green steel to Italy in a move experts saw as setting the stage for exporting more of the metal.
The agreement “marks an important milestone for China’s steel industry in actively practicing green development principles,” China Baowu Steel Group’s chief carbon-neutrality representative, Wang Qiangmin, said in a press release.
Frederik Van de Velde, the chief executive of ArcelorMittal Belgium, called the partnership “a game-changer for our industry” in the release.
“By aligning our standards, we are … shaping a global consensus on what defines low-emission steel,” he said.
ResponsibleSteel this month released its “interoperability framework,” setting out the principles that will enable translating carbon metrics across its various agreements.
Heaton said India could prove trickier to rope into a standard-setting scheme because the government in New Delhi already established its own certification standards for green steel last December. The United States may be reversing most of its industry efforts on green steel, but the federal government already has in place a procurement system with what Heaton called a “threshold definition of what it means for a state procurement entity to buy clean steel, and it’s not a million miles from” the standards ResponsibleSteel is setting in China and Europe.
Despite its backtracking on green steel, Heaton said, the U.S. has some green shoots. In what’s arguably the most significant American project now, Hyundai Motor Group is plowing ahead with a low-carbon steel plant in Louisiana, with the intention to initially rely on natural gas but swap in green hydrogen sometime in the next decade. Cleveland-Cliffs may have abandoned its plans to rebuild an Ohio coal-fired steel plant as a green-steel factory, but the firm’s new strategic partnership announced last month with the South Korean steel giant Posco could lay the groundwork for future decarbonization efforts, particularly as the Pohang-based company advances other green-steel projects abroad.
Still, worldwide, the sector’s efforts to decarbonize face serious challenges. “There’s a trickle of projects going forward, but it’s really not looking very promising,” Heaton said. “The finance needs to flow. The demand needs to be there. The agreements need to be signed that would actually signal to steelmakers that they can invest in a way that’s viable.”
Creating a common language for what such investments would look like, she said, is a key step toward establishing those conditions.
“The ultimate goal is comparability,” she said. “Whether you’re a buyer or a lender, you’ll know the performance of a project you’re funding or buying from. You’ll know how it stacks up on a global scale.”
.svg)
