Green Steel: Still Nascent, But Industry is Growing
According to global credit ratings and research firm Fitch Solutions Country Risk & Industry Research unit (Fitch), global usage of 'green' steel could see accelerated adoption in the medium term after further commitments to its development were discussed at COP27.
Fitch highlights that among the varied discussions held at COP27 in Egypt in 2022, governments agreed on targeted action on sectors accounting for more than 50% of total emissions.
The steel and iron ore sector, which accounts for an estimated 7% of global emissions from energy use was among the key sectors focused on alongside road transport and agriculture.
Specifically, the plans are for governments to commit to enhancing transparency and credibility of 'green' steel, developing better definitions of low-emissions steel and near-zero emissions steel.
Governments would also partner with private finance to spur procurement and buying of 'green' industrial goods, hoping to stimulate the markets for 'green' materials and promote the adoption of such materials despite their higher costs.
Results of the efforts are expected to be delivered in next year’s COP28, to be held in November 2023. Countries under the COP presidency, including India, Egypt, EU, Morocco and the UK aimed to deliver on these commitments, the Fitch report says.
Dedicated climate investment funds to drive 'green' steel transition were also mentioned in efforts to direct more funds into the sector, where an estimated US$1.4 trillion is needed to decarbonise the iron and steel sector by 2050 according to International Energy Agency and Wood Mackenzie.
Today, the report adds, up to 70% of the world’s steel production is made using traditional blast furnaces, emitting close to 1.89 tonnes of emissions per tonne of steel.
Electric arc furnaces, a greener method of producing steel, produces up to 75% less emissions according to CRU Group studies. However, this method is limited to just 30% of global production, and has severe constraints requiring recycled scrap as raw materials.
These also have varying use rates and not all scrap can be used for production. A limited scrap supply is insufficient to meet growing steel demand. Further, energy required to power EAFs may also come from fossil fuel related sources, ultimately still contributing to a firm’s Scope 2 emissions.
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