Investors lay out expectations for steel sector to reach net-zero emissions

An initiative involving more than 500 investors representing $55trn in assets has outlined a set of priorities that it will engage in to help the global steel sector reach net-zero emissions by 2050 at the latest.

Investors lay out expectations for steel sector to reach net-zero emissions

The foundation industries account for 15% of the UK’s emissions, according to Innovate UK, and are worth around £52bn to the economy

The Climate Action 100+ corporate engagement investor initiative has set out its expectations for the steel sector to reach net-zero. Published by the Institutional Investors Group on Climate Change (IIGCC), the recommendations claim that it is technically feasible for the sector to reach net-zero, provided a combination of emerging technologies are used alongside widescale collaboration.

Steel is a notoriously high-emission material and a hard-to-abate sector. More than 90% of metal produced in the world is steel, and the sector is accountable for around 9% of global emissions from fuel use. Researchers believe that a combination of electrification, energy storage, alternative fuels and circular economy innovations are needed to align the sector with net-zero. Carbon capture and offsetting are also being explored by some producers.

Investors will engage with businesses in the sector using the IEA’s net-zero scenarios. Doing so would require emissions across the sector to fall by 29% by 2030 and 91% by 2050. However, the sector is not currently on track to deliver this level of decarbonisation.

Technologies such as hydrogen-based direct reduced iron with electric arc furnace (DRI-EAF) or carbon capture (utilisation) and storage (CCS/CCUS) are crucial to meeting net-zero, the investors argue. Collaboration across the industry will also be required, with investors claiming that 58% of total emission reductions will be delivered through “coordinated stakeholder action”.

Expectations from investors include the setting or short, medium and long-term decarbonisation targets aligned to the IEA’s scenarios and for reports to be produced from 2022 onwards that outline how CCUS and hydrogen-based DRI-EAF will be introduced.

Steel manufacturers are also expected to align capital expenditure with broader net-zero strategies.

The IIGCC’s chief executive and Climate Action 100+ Steering Committee member, Stephanie Pfeifer, said: “The steel industry still has some way to go meet the 29% emissions reduction required by the IEA’s net-zero by 2050 scenario, and there is no silver bullet solution. We cannot afford to delay action – while emerging technology has a role to play, the IEA’s report highlights that existing technology can deliver 85% of the emissions reductions needed by 2030.

“We also need to see a number of cross-sector interventions, including enhancing material efficiency and improving recycling rates to improve the industry’s circularity. Investors need to see interim targets from companies and then detail on how they will deliver these in the short and mid-term, so they can accurately assess how prepared they are for the net-zero transition.”

Climate Action 100+ will develop global strategies for a number of key sectors in the coming months.

Progress to date

For the steel sector, nine companies representing around 20% of global steel production, including the five largest producers, have set firm net-zero emissions commitments.

Last week, one of the world’s biggest steel manufacturers, ArcelorMittal, announced plans to reduce carbon emissions by 25% by 2030 as part of a wider net-zero ambition for 2050, with the new target set to be back by a $10bn investment into low-carbon and circular solutions.

ArcelorMittal unveiled an ambition to reach net-zero emissions by 2050 back in September 2020. The company has this week set a new interim goal to reduce its carbon emissions intensity by 25% by 2030 for scope 1 and 2 emissions globally. A European-wide target of a 30% emissions reduction has also been increased to 35%.

The company estimates that reaching these goals will require an investment of around $10bn in capital expenditure, with 35% of the funding to be delivered by 2025. ArcelorMittal believes that the steel industry will “undergo a transformation of the assets used to make steel on a scale not seen for over 100 years”.

Additionally, a new initiative was launched last year to accelerate decarbonisation in the sector.

Convened by The Climate Group, which is perhaps best known for its RE100 and EV100 initiatives, the new scheme is called SteelZero and will represent businesses from all parts of the steel value chain.

By signing up to SteelZero, companies commit to procuring, specifying, stocking or producing 100% net-zero steel across all operations by 2050 at the latest. ArcelorMittal has shared its approach to decarbonisation with other members.

Matt Mace

Comments (3)

  1. Kim Warren says:

    2050 is way too late. We don’t have 30 years to fix this. Until they can eliminate emissions we can only stop using the stuff as far as possible … minimum new cars, construction etc.

  2. Richard Phillips says:

    Very little scientific information to indicate from where the original low carbon energy is to be derived.
    Hydrogen, to be low carbon has to electrolytic, or to involve CCS.
    Energy storage is notoriously difficult and expensive. The geography of the UK is not conducive to hydrogeneration, and very large batteries, on the scale required are nonstarters.
    The only practical solution involves nuclear generation as the prime mover.
    The problem is global, and puts the poor economies with unsupportable burdens.
    Kim’s view carries much weight.
    Richard Phillips

  3. Kim Warren says:

    thanks Richard
    We seem to be getting better at storage quite fast, and technologies like iron-reduction just could become viable and super-cheap pretty quickly – [wrongly described as ‘fuel’ rather than storage, but still]
    The problem as you say is how *fast* we have to move. Nuclear plants take a decade to develop and produce no power at all until built

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