Summary: The IRA, IIJA and Buy American Act provide powerful incentives to mobilise the US steel industry towards near zero emissions production by creating demand for green steel.
Why this is important: Solutions do exist but they will require partnership building both on the supply and demand side to ensure economic scalability. Green steel's progress could provide a template for other hard to abate sectors.
The big theme: Steel is a fundamental building block of our modern economy. It is used extensively in construction, automotive and transportation as well as energy, infrastructure and machinery. Globally the steel industry is responsible for approximately 7% of human-made greenhouse gas emissions.
Steel is an alloy of iron and carbon with small amounts of other elements producing varying properties - for example stainless steel which contains chromium doesn't rust or corrode as easily as other forms of steel.
Whilst almost 90% of steel is recycled, the steel industry is still responsible for about 7% of all man made global greenhouse gas (GHG) emissions and so is an important decarbonisation problem that needs solving.
Steel is currently produced via two main routes:
- Blast Furnace-Basic Oxygen Furnaces (BF-BOF): Coke (coal that has been heated at high temperature for a day, then cooled) and iron ore (in the form of sinter) are fed into a blast furnace and then hot air at 1,250oC is blown in from below. The iron ore is 'reduced' (its oxygen is removed) to produce 'pig iron' and a waste product called slag. The amount of carbon in the pig iron is reduced by mixing in scrap steel and then blowing oxygen in to produce crude steel. Between 70 -75% of current global steel production comes from the BF-BOF method.
- Electric Arc Furnaces (EAF). A mixture of scrap steel, Directly Reduced Iron (DRI) and quicklime (calcium oxide) is preheated (often using heat from the previous cycle of steel making). This mixture or 'charge' which can be fully scrap or fully DRI, is put into the furnace and graphite electrodes inserted and an electric current passed through them creating an arc (plasma) which melts the charge at a temperature of up to 3,000oC. The process is repeated a number of times and then oxygen is injected to reduce the mixture to steel. The EAF technology, which uses mainly recycled scrap steel, is seen as better for the environment as it produces materially fewer GHG emissions. But, there is not enough recycled steel to meet growing demand using the EAF steel making method alone. DRI could take up the bulk of the shortfall in scrap. The iron is reduced using syngas, a mixture of carbon monoxide and hydrogen. If the hydrogen is produced using renewables rather than from fossil gas, then emissions are even lower.
Let's look at why RMI believe that green steel is at a tipping point and what the financial considerations are when thinking about the transition to greener steel.
Not only is green steel an important sector from an emissions perspective but it could also be the trail blazer for a number of other important transitions.
Are we reaching a tipping point?
A recently published report from RMI argues that a combination of factors have led to that tipping point being reached driven by both demand and supply side factors.
"We believe the time for sustainable steel has arrived.."
In fact so much so that they are launching a new sustainable supply line for steel, the 'Sustainable Steel Purchasing Platform' with the aim of helping companies secure low-emissions steel volume. RMI's hope is that by pooling interested buyers of various sizes throughout the supply chain, it should act as a virtuous circle to stimulate the required investment.