Baowu Steel and Rio Tinto comes together to cut Carbon Emissions during Steel Production

Mining giant Rio Tinto has struck a deal with its biggest Chinese iron ore customer, China Baowu Steel Group, to develop ways to reduce carbon emissions pumped into the atmosphere as part of the steelmaking process.

According to the reports, the MoU (Memorandum of Understanding) that was signed on 25 September is an attempt by Rio Tinto to curb its 'Scope 3' emissions and follows a pledge in July by its rival, BHP, to spend USD 400m as part of a plan to tackle the climate crisis.

The China Iron and Steel Association (CISA) invited the parties to sign the MOU at its China International Steel and Raw Materials Conference held in Qingdao. The MOU will enable the formation of a joint working group tasked with identifying a pathway to support the goal of reducing carbon emissions across the entire steel value chain, which accounts for between 7-9% of the world's carbon emissions.

The working group will establish a joint action plan on how to best utilize the parties' complementary strengths in research and development, technologies, processes, equipment, logistics, industry coordination and policy advisory capacities to combat climate change and improve environmental performance.

The partnership between Rio Tinto and China Baowu, which also includes Tsinghua University, will also look at emissions from shipping. Shipping represents low-hanging fruit for companies looking to improve their environmental credentials because emissions can be quickly reduced by changing from ships using bunker fuel - heavy, carbon-intensive oil - to natural gas.

Steelmakers around the world are under increasing pressure to curb their emissions. In Europe, carbon pricing has crimped steel mill profits, putting jobs at risk and forcing companies to look for alternatives to coal to save on emissions costs.

Both Rio Tinto and BHP have said they want to dramatically reduce their emissions but the strong language has so far not been enough to satisfy activists. Rio Tinto has reduced its emissions footprint by more than 30% since 2008. In 2015, in support of the Paris Agreement, it committed to substantial long-term decarbonization by 2050. In 2018, it completed the divestment of its coal assets, becoming the only major mining company not producing fossil fuels.