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The steel sector is responsible for up to 9 per cent of global emissions. Without urgent action to tackle steel industry emissions, the world will stay off track to meet its global goal of holding warming below 1.5C.

Governments, investors and companies alike are waking up to this challenge. 

At the global climate change conference in Glasgow last year 40 world leaders signed up to a new Breakthrough Agenda, including a commitment from five of these governments – the UK, India, Canada, Germany and the United Arab Emirates – to the newly created Industrial Deep Decarbonisation Initiative, focused on decarbonising the steel sector and other heavy industries. 

Meanwhile in the private sector, some 25 steel demand companies have committed to procuring, specifying or stocking 100 per cent Net Zero STeel by 2050 at the latest under the banner of SteelZero, and 55 members of the First Movers Coalition have committed to procuring net zero industrial materials. 

But there is still a long way to go. 

As governments get ready to meet at the Global Clean Energy Action Forum in Pittsburgh next month (21-23 September 2022), they have an important opportunity to use their public procurement to drive further action towards zero emissions steel. 

Ahead of this, (on 22 August) Climate Catalyst and Solutions for Our Climate, brought together policymakers, business leaders and investors from across India, Japan and South Korea to examine the challenges on the road to net zero and the opportunities for action within the steel sector. 

Key to this, will be ensuring that governments and the private sector alike show a clear commitment to sourcing clean steel. 

Steel plays an important role in economies and societies

“The steel industry means a lot. It means a lot to our economies. It means a lot to our politics,” explained Mike Williams, Senior Fellow, Center for American Progress.

The industry will continue to play an important role in society. The key will be driving down emissions, without losing the industry – and its huge role at job creation – entirely. That means encouraging facilities to clean up their act and get on the pathway to decarbonisation. 

A key role in this will be public procurement. Purchasing low carbon steel for their infrastructure projects, for example for housing, roads, railways, shipping and the expansion of renewable energy. 

But signalling their intent to buy clean steel, governments will send a clear signal to the market and set the direction of travel towards low carbon steel. 

This could also have wider ramifications, as explained by Joojin Kim, Managing Director, Solutions for Our Climate. He told the event how decarbonising the steel sector could set a pathway for other heavy industries, and even the power sector. 

The demand for decarbonised steel could be a driver for the greater use of renewable energy, according to Kim. 

“Steel is a global commodity… [companies] bring in demand for green steel, which is easily translated into clean energy from various points in the world: German automakers, US IT companies come to our steel makers with green steel demands. And that kind of demand can be a game changer in changing our power sector and making clean energy cheaper.”

The role of Asian steelmakers

With some of the largest steel producing countries in the world, Asia will be at the forefront for the transition towards greener steel. And as the global steel market moves towards stricter regulatory requirements in response to carbon emissions, countries not acting risk being left behind.

Take South Korea for example. It has one of the highest per capita steel outputs, driven not only by domestic pressure, but also the use of Korean steel for commodities across the world.

Speaking at the event Michael Long, Head of Sustainability at Lendlease Asia – a multinational construction, property, investment and infrastructure company – emphasised this point as he described the companies move to conduct life cycle assessments across key construction projects across Asia, including in Japan, Singapore and Malaysia.

“Not only are we starting to target reduced embodied carbon in the buildings we construct”, he said, “but we’ve also launched a low carbon construction tender, which talks specifically about electrification of construction equipment, the use of renewable fuels, targeting low carbon steel, low carbon concrete as well.” 

For Indian steel, which is mostly used domestically, public policy can have an even greater impact. Girish Sethi, Senior Director, Energy, TERI explained how the steel capacity will triple in India in the next 30 years, due to an increase in infrastructure development. 

He stressed how critical it will be to have “industrialisation without carbonisation.”

But he also stressed the benefits of taking early action. “There are significant ‘first-mover’ advantages for progressive companies, including access to funding, talent attraction and retention, and positive publicity.”

Not only will this make Indian companies globally competitive, but it would also support the country’s ambitions of being “a self-reliant, net zero, major economy.”

However, getting there will require the “appropriate policy support….This will require action now in the short-term in terms of creating demand for green steel and  availability of technologies and finance to produce green steel.”

The Industrial Deep Decarbonisation Initiative – a clear signal from governments

One clear way governments such as India, Japan and South Korea is to use their purchasing power. In doing so they can help create a market for green steel and create the right incentives for the private sector to follow suit. 

As explained by Rana Ghoneim, Unit Chief, Department of Energy at UNIDO “We need more governments to step up and leverage the power of public procurement and create incentives to shift towards production of low and near zero emissions materials.”

This will be a key task of those governments meeting at the Global Clean Energy Action Forum in Pittsburgh next month (21-23 September). This meeting will include a convening of the IDDI – co chaired by India and the UK – where governments will have the opportunity to pledge their support for green public procurement of steel. 

Such pledges are an important step, as Young-Jin Lee, Head of Korea ESG Solutions, S&P Global told the panel “Intergovernmental deals will be instrumental. These initiatives are crucial to start off and bring the environment to these countries. Policy and regulatory support will be needed… Policy needs to provide regulatory certainty.” 

As Jen Carson, Head of Industry at the Climate Group said “Cutting the carbon emissions from steelmaking has fast become a global priority.”

Through strong commitments to initiatives such as the IDDI – and clear targets to increase their purchasing of green steel, governments have a vital opportunity to harness this growing demand, and speed up the transition. 

In doing so 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. 

About the Author

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.

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