The steel sector alone produces about 7-9% of the world’s annual greenhouse gas emissions. As a top consumer of steel globally, the auto industry has an opportunity and responsibility to use its outsized leverage on this industry to clean up its emissions.
The are several strategies for decarbonising steel production that can be supported by automakers, including:
- Increasing scrap-based production – scrap-based production “requires only around one-tenth of the energy of primary steel production.” According to the Mission Possible Partnership, increased scrap-based production will therefore “play an increasingly important role in decarbonising the sector, both as an input to secondary steelmaking (which relies heavily on electricity and will decarbonise in tandem with the decarbonisation of the power sector) and as an input to primary steelmaking that can help lower the carbon intensity of production.”
- Using zero-emissions electricity — As the RMI outlines, “incorporating renewables in manufacturing processes will further reduce scrap-based emissions due to the large and increasing portion of this material that is processed in electric-arc furnaces.”
- Deploying new technologies that advance the industry to fossil free steel — Incorporating low-and zero-emissions technologies such as green hydrogen-based reduction and iron ore electrolysis will result in significant emissions reductions for primary steel production, and can help move the industry towards the ultimate goal of eliminating fossil fuels and emissions altogether.
Although it’s essential for automakers to support the growth of secondary, or scrap-based, steel production by increasing the amount of recycled steel used in their production cycles, it is also essential that they use their purchasing power to incentivize investment and production of low and zero-emissions technologies for primary steel production. This is because, the Mission Possible Partnership outlines, “even in a more circular economy, over one billion tonnes per annum of primary steel (using iron ore feedstock as opposed to scrap) will be needed globally by 2050. Under a business-as-usual scenario, the increase in demand would result in 2.8 billion tonnes of annual CO2 emissions from the steel sector in 2050. This figure greatly exceeds the remaining carbon budget for the steel industry envisioned by the IEA’s beyond 2°C scenario, and the more stringent net-zero emissions target advocated by an increasing cohort of observers and countries… It is therefore critical that low-and eventually zero-carbon technologies are developed and deployed for primary steel production.”
Such technologies are increasingly coming online and commercially viable, but are not yet at scale and further development is needed in some technologies. However, they “must be brought to commercial scale by 2030 at the latest to enable fast deployment across the world in the 2030s and 2040s.”
As top consumers of steel globally, the auto industry can use its outsized leverage on these industries to spur innovations and investment in the breakthrough technologies that are required to keep these industries climate goals on a 1.5 degree pathway, while also providing the opportunity to reap the benefits of access to fossil free materials in a fast moving market.
What can automakers do?
Automakers can spur investment in and the deployment of the breakthrough technologies that are required to decarbonise steel by:
- Undertaking equity investments, joint ventures, offtake agreements and other contractual agreements with suppliers to catalyze investment in and production of fossil free steel.
- Setting publicly disclosed targets to increase the quantity of fossil-free steel used in their production cycles and disclose progress towards these targets.
- Joining demand-side multi stakeholder initiatives such as Steel Zero, Responsible Steel and The First Movers Coalition. By aggregating the commitments of multiple steel consumers, such multi-stakeholder initiatives can unlock investment in fossil free steel by creating confidence in the scale of future markets.
- Using their voices publicly to send demand signals to the market with regards to the auto industry’s commitment to purchase these materials.
Automakers should also support the increase in scrap-based steel production by setting targets to increase the amount of secondary / scrap steel in their production cycles, disclosing their progress towards achieving these targets, and developing closed loop processes to improve the recyclability of steel.
Finally, automakers should implement stringent environmental and human rights due diligence requirements for their steel suppliers to ensure that, from mining to manufacturing, the steel used in their vehicles does not cause other negative environmental and human rights impacts.