Pathway to green steel
(Electric arc furnace at Magna - The Big Melt, M J Richardson CC-2.0)

Pathway to green steel

Steel is a fundamental building block of our modern economy. As a large source of GHG emissions, its production is an important decarbonisation problem. But we have solutions.

Summary: The IRA and the IIJA provide powerful incentives to mobilise the US steel industry towards near zero emissions production. As a critical commodity for construction and other major industrial uses, as well as a large source of GHG emissions, steel production is an important decarbonisation problem.

Why this is important: Solutions do exist but they will require partnership building both on the supply and demand side to ensure economic scalability.

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.


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 seven percent 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.

What are the financial considerations?



The details


What are the financial considerations?

The steel making process, like many heavy industries, is incredibly complex. It's not just a case of throwing some iron ore, coking coal, and quicklime into a furnace. Companies have invested a lot in accumulated knowledge and infrastructure. This is a capital intensive industry with relatively low margins and returns on capital employed. Developing new processes to create green steel, even if they might look broadly similar to processes used now, is a material risk for the companies involved. Changing processes from what they know to something new is a material "step into the dark". Learning how to create green steel in a cost effective way will involve hundreds if not thousands of small improvements - fine tuning production processes, inputs and operating practices. This is an important factor to bear in mind - it's going to take time.

The challenges are however solvable. Some of the solutions require financial and other assistance from governments, as they seek to create benefits for the wider society that they represent. Important considerations include:

  • Jobs: looking specifically at Europe -while the steel industry is nowhere near as important as it used to be, its still a decent sized employer. According to Eurofer data, the sector directly employs c. 325,000 people across Europe, with the biggest country being Germany (just over 83,000). If you add in indirect employment, the total number of jobs is claimed to be as much as 2.6m, with c. 500,000 of these being in Germany. The region produces over 177m tonnes of steel per year, c. 11% of global output. In terms of consumption, the biggest European end markets are the construction industry, automotive, and metal goods.

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