“There is no more important region when it comes to steel decarbonisation than Asia.”
Those are the words of Jen Carson, Head of Industry at the Climate Group and moderator of a roundtable event on ‘Building leadership and accelerating action on steel decarbonization in Asia: Experiences of India and the Republic of Korea’ held as part of the inaugural Global Clean Energy Action Forum (GCEAF).
The event, hosted by Climate Catalyst, The Energy and Resources Institute (TERI) and Solutions for Our Climate (SFOC) brought together leaders from government and industry to examine the opportunities and policy levers to catalyse steel decarbonisation.
The core message of the discussion was clear: steel decarbonisation is critical to achieving national and global climate goals, and Asia will be at the heart of the steel decarbonization story.
The role of Asia in steel decarbonisation
The steel sector is responsible for as much as nine per cent of global emissions. Asia is home to some of the world’s largest steel-makers. In fact, in 2021, it was responsible for some 72 per cent of global steel production. This was largely driven by China, India, Japan and South Korea.
Meanwhile, as demand for steel grows, we can expect more emissions-intensive blast furnace-basic oxygen furnaces (BF-BOF) being built in the region. This method of steel production emits around two tonnes of CO2 for every tonne of steel produced.
Prabodha Acharya, Group Chief Sustainability Officer at JSW Steel highlighted this risk in a video message sent for the event, saying, “In India, the problem is especially acute given that steel production contributes 12 per cent emissions and two per cent to GDP. Further, given India’s massive 1.3 trillion infrastructure plan, the demand for steel is only going to go up and it becomes imperative to reduce emissions in order to tackle the adverse effects of climate change.”
2050 is an investment cycle away, now is a vital opportunity to act
Governments and companies across the world are mobilizing around industrial decarbonization, and setting forward their plans for reaching a net-zero emissions world by 2050.
Given the long lifetime of steel plants, this deadline is just one investment cycle away. If near-zero emissions steel is to become the default choice, then investment decisions for that future are needed now.
This was highlighted by Araceli Fernandez, Head of Technology and Innovation Unit, Directorate of Sustainability, Technology and Outlooks, International Energy Agency (IEA) who told the event: “There is a tiny window of opportunity given the long investment cycle for steel production.” She warned that failing to act now would mean “locking in technologies for the next 30 years” and “losing those emissions reduction opportunities”.
This warning is particularly pertinent given the IEA’s Breakthrough Agenda report, which warned that while progress towards near-zero emissions steel is accelerating, it is significantly behind where it needs to be to help meet our global climate goals. And in many parts of the world, the sector is still heading in the wrong direction.
The report warned that international collaborative action will be ‘imperative’ to generate the ‘enabling conditions’ needed’ to drive steel decarbonisation at the pace and scale required.
As Fernandez said: “International collaboration remains fundamental to bring technologies that can enable such transition to commercial scale as soon as possible, and to create robust markets to get such technologies deployed in regions around the world.”
Building a green steel industry in Asia – what will it take?
The event aimed to bring government and industry leaders from Asia and beyond to discuss the policy levers available to accelerate steel decarbonisation across Asia. In particular, the importance of demand-side levers – from both private and public steel consumers – in sending the right signals to steel producers.
Government-led demand side policies, such as green public procurement (GPP), are one such critical lever. By pledging to require, buy and use low-carbon steel for public infrastructure projects – such as housing, roads, railways, shipping and the expansion of renewable energy – governments send a clear signal to the market and set the direction of travel towards near-zero emission steel.
GPP is a key initiative pushed by Industrial Deep Decarbonization Initiative (IDDI), a global coalition of public and private actors to promote the decarbonization of heavy industry. As part of the IDDI, the governments of the UK, India, US (who joined IDDI at the GCEAF), Germany, the UAE and Canada have pledged to buy more low-carbon industrial materials to expand the market. They are also calling on more steelmakers to join the initiative, especially those in Asia.
As Rana Ghoneim, Chief – Energy Systems and Infrastructure Division, United Nations Industrial Development Organization (UNIDO) said: “Now is the moment for countries to engage… for industry to engage… and to build transparency across the market, to bring in supply and demand together and also to lock in the funding.”
The importance of public-private cooperation throughout the steel value chain was highlighted by others, while attendees also examined other key areas where governments can lead the way, including supporting the financing of pilot projects for new technologies and establishing policies to support the overall transition.
As stressed by Acharya: “A wide range of policy levers will be needed in order to scale-up demand in the near term and in the long term. And R&D collaboration is at the core of the industry transition.”
Yoon Chung Chin, Principle Researcher of the ESG Research Division at POSCO Research Institute (POSRI) also warned that policy priorities should focus on “reducing uncertainties surrounding the development of the carbon price and setting direct/indirect incentives to stimulate additional demand for green steel. Providing better access to “transition finance” is also an important aspect.”
The roundtable discussion made clear that creating a market for near-zero emissions steel is critical to reaching global climate goals, and as Carson said: “To get the steel industry to net zero in India and around the world, we need to first create a market for responsibly produced steel.”
It is critical that governments show their commitment to steel decarbonization, and with COP27 just around the corner there is no better time to speed up the transition.
By setting clear targets now to increase their purchasing of green steel they will send a strong signal to the private sector, foster a market for green steel, and increase the pace of their own national efforts to reduce emissions in line with the goals of the global Paris climate agreement.
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Climate Catalyst
Climate Catalyst strengthens collaboration and mobilises new actors on pivotal climate challenges. We work behind the scenes with diverse stakeholders to identify opportunities where action to date has been limited, the potential for collaboration is high and there’s significant potential to reduce greenhouse gas emissions.