Steel goods will play a vital role in the transition to a low carbon world, but the production process itself is notoriously carbon and energy intensive. Given the urgent need to align all sectors with the goals of the Paris Agreement to keep global temperature increases within safe limits, maintaining a business-as-usual stance presents a number of risks for steel producers and their investors.
Although steel can be recycled, there is not enough scrap steel to meet the continued growth in steel demand. In addition, scrap impurities limit the potential for recycled steel, meaning that smelting of virgin iron ore is required for high-grade products. Steel is therefore considered a hard-to-abate sector, but national net-zero commitments and pressure from customers mean that solutions must be found to help drive down emissions.
Countries such as Sweden, the UK, France, Denmark, New Zealand and Hungary have already made legally-binding national net-zero emissions commitments, and some three-quarters of 2020 steel production came from countries where such commitments were in law, in proposed legislation or set out in a policy document. Producers who fail to innovate may run the risk of asset stranding.
We engage with some of the world’s largest steel producers including Posco and Severstal, where we co-lead the collaborative engagement with the companies as part of Climate Action 100+. We also engage with leading miners on these challenges. Steel companies have an interest in reducing the emissions from their supply chain as iron ore and coal mining are energy intensive. These raw material inputs for steelmaking are also bulky and heavy to transport, generating more carbon emissions.
This article appears in our Q2 2021 Public Engagement Report.