Global government support towards decarbonising the steel sector

Published on August 7, 2024 by Jagrati Dhote

The steel sector, an important pillar of contemporary society, is at a point of crisis. Although vital to growth of the global economy, its production methods, which entail heavy energy consumption, substantially increase the generation of greenhouse gases. International governments are paying more attention to the steel sector’s obligations as they realise how urgent it is to lower the environmental impact linked to steel manufacturing while working towards achieving net-zero emission goals. Their united efforts are intended to promote greener innovations, encourage invention and establish an era of sustainability. These initiatives show significant commitment to reaching exceptional emission levels – a 45% drop in production-related emissions intensity using blast furnaces (BFs) and a decrease of 65% by using energy-efficient BFs. Countries such as the UK, India, Germany and Sweden are working hard to support steel manufacturers to meet the more-than-USD350bn investment needed to achieve net zero by the middle of the century.

Europe is one of the most active regions where governments actively support steel decarbonisation. The European Union (EU) is setting a splendid example by actively supporting decarbonisation of the steel sector through hundreds of[1] decarbonisation research and pilot-project initiatives, spending millions in funding (details in Table 1) and drafting supportive policies, a few of which are mentioned below:

• REPowerEU plan for hydrogen-based steelmaking:

  • The European Commission intends to replace existing production processes with new plants based on direct reduction of iron (DRI) using hydrogen as a replacement for energy-intensive sources such as coal, oil and natural gas.

  • It offers multiple incentives to drive its goals, including energy security, affordability and efficiency. It provides financial support for renewable-energy projects, research and green infrastructure development, clean-energy technology adoption, emission-reduction mechanisms, etc.

• Helping to combat cost challenges:

  • While low-CO₂ steel production may be more expensive in the short to medium term, the EU recognises the importance of transitioning to sustainable practices.

  • By providing grants and funding to steel producers, the EU government is helping in the sector’s decarbonisation journey.

Table 1: European government grants to steel producers[2]

In Asia, the Chinese government is leading the sector’s decarbonisation initiatives through its active support. China’s role is crucial in decarbonising the global steel sector, as it produces more than half of all global steel and over 60%[3] of carbon emissions from steel. In 2022, the Chinese government announced an economic stimulus package that could revive the steel market. This package includes CNY300bn (USD44bn) in infrastructure quotas and bank investments. China has also unveiled a series of significant announcements and action plans aimed at advancing decarbonisation initiatives. These measures align with the direction towards promoting sustainable industrial practices and are expected to incentivise companies in China to adopt low-carbon-steel practices.

• The Chinese State Council recently released a strategic initiative to encourage end-use product exchanges and massive updates on the use of related tools and instruments.

• The initiatives aim to speed up the development and amendment of regulations on reusing resources, carbon mitigation, energy efficiency and preservation of the planet.

• The initiatives list the steel sector as one of the significant sectors. Their primary goal is to ease technology innovation and modernise industrial product manufacturing, energy production and transmission instruments.

India is also taking steps towards decarbonisation, with initiatives such as the Industrial Deep Decarbonisation Initiative (IDDI) focusing on heavy industrial sectors such as steel, cement and concrete. Both countries recognise the importance of sustainable practices and are actively working towards reducing carbon emissions in the steel sector. China’s recent policy announcements and focus on equipment upgrades position it as a leader in promoting sustainable practices in the steel sector. However, India’s initiatives are also noteworthy, and further developments are expected in the coming years.

In conclusion, the global steel sector is at a critical juncture, balancing its pivotal role in economic development with the urgent need to reduce greenhouse gas emissions. Governments worldwide are helping in steel-decarbonisation efforts, aiming to foster innovation, incentivise cleaner technologies and create a sustainable path forward. Europe, led by the EU, exemplifies robust support for decarbonisation through research, funding and policies. Meanwhile, China and India are making strides towards decarbonisation, emphasising sustainable practices in heavy industrial sectors. As the world collectively strives for net-zero emissions, these efforts underscore the sector’s commitment to a greener future.

How Acuity Knowledge Partners can help

We specialise in providing bespoke research services and solutions, including supporting asset managers in tracking industrial trends or specific themes. In terms of decarbonising the steel sector, we can help clients capitalise on lucrative opportunities by identifying key players involved in the drive and by determining the areas in which governments are increasing investment.

Sources:

• China's crucial role in decarbonising the global steel sector – E3G

• For 8 months 2023 European governments have announced €8.7 bln for decarbonization of the steel sector (gmk.center)

• org

• eu

• China's two policy banks to raise 300b yuan to finance major projects (www.gov.cn)

• [1] eurofer.eu

• [2] gmk.center

• [3] E3G

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