Are top global steelmakers doing enough to cut down carbon emissions?
...
- Indian producers at higher end of emissions curve
- Most global companies not aligned with science-based reduction targets
- CBAM may force Indian mills to adopt interim decarbonisation measures
Morning Brief: The average carbon emissions intensity of leading global steel producers, as per data collated by BigMint, is a tell-tale sign of the inherent structural difficulties involved in steel industry decarbonisation.
Data reveal while steel companies in Japan, India and China - countries with a high share of BF-BOF steel production - typically have higher CO2 intensities, European and American steelmakers are far lower on the emissions scale.
On the global steel industry decarbonisation scale neither are all countries - or companies - placed on an equal footing nor is the challenge to transition to low-carbon technologies equally difficult for all companies. Technology transition in the global steel industry can hardly happen during a fixed timescale or in one go for all the companies in the world.
Key levers
Certain key requirements for steel decarbonisation are:
- Availability of scrap steel with very low tramp elements (mainly copper impurities)
- Availability of low-carbon energy sources (mainly renewables)/low existing grid emissions
- Availability of high-grade iron ore (>Fe67%) for reduction and subsequent processing into liquid steel in EAFs and/or BOFs
Across geographies, these key tools and/or means are not equally available. Therefore, the challenge is unequal for steel companies.
It is instructive to note here that the average carbon emissions intensity from the BF-BOF route is 2.33 tCO2e/tcs, while scrap-based production has a typical intensity of 0.68 tCO2e/tcs, according to a recent study by the Australasian Centre for Corporate Responsibility (ACCR).
It is easier to decarbonise scrap-based steel production compared with ore-based production, as transition to low-carbon electricity is what is required for the latter.
However, archetypal emissions from the different steelmaking routes in India are higher due to the predominance of coal in steel production, low raw materials quality, and higher grid-based emissions.
Targets & shortfalls
The steel industry is actively committing to long-term decarbonisation, with nearly all leading companies setting ambitious net-zero targets by 2050, alongside quantifiable medium-term reduction goals.
However, short-term commitments are few, with a trend of backended commitments. This highlights:
- the steel industry is deferring a great part of its decarbonisation efforts to after 2030, raising concerns as to when net-zero emissions targets be met in accordance with the Paris targets
- the need for adoption of new technologies to avoid the lock-in of high-GHG emitting processes
Leading Chinese and Japanese BF-based producers such as Baowu, Nippon Steel, etc. have pledged 30-35% reduction in emissions by 2030. Similarly, POSCO, Tata Steel, JSW have also announced interim carbon reduction targets. However, not many companies' targets are aligned with science based targets initiative (SBTi), especially excluding scope 3 emissions attributable to upstream processes.
For clearer accountability, companies should set distinct carbon intensity targets for primary and secondary steelmaking, reflecting the significant carbon intensity differences between these processes.
Challenges in India
The share of the BF-BOF route in the country's steel production is expected to increase to around 55% from the current 46% by 2030, as per BigMint estimates. This points to the possibility of locking-in substantial emissions for decades to come. The current fleet of BFs in India and China, particularly, is quite young, meaning that low-carbon transition will imply merely introduction of more energy efficiency measures in BF-BOF leading to meagre reductions in emissions in the absence of CCS.
However, sources are of the view that the government is looking at fixing a definition of green steel to facilitate carbon accounting, declarations, mitigation efforts, as well as forming a bulwark for the country's upcoming carbon emissions trading market. The target will be to lower carbon emissions intensity from a level of 2.55 tCO2e/tcs to 2.2-225 tCO2e/tcs in the short term.
Interestingly, with the full-fledged introduction of the EU's CBAM, the country leading steel producers - and major exporters - may well look at minimising emissions of a certain portion (although negligible) of their overall steel production, which will likely be earmarked for exports. It is expected that switching to natural gas-based DRI, increasing usage of prime scrap, and transitioning to renewable energy sources, particularly solar, will be the key mitigation tools in the short term.
