Decarbonizing Steel is a Climate Imperative and an Economic Necessity

Decarbonizing Steel is a Climate Imperative and an Economic Necessity

Executive Director Adina Renee Adler discusses low carbon steel in a sustainable global economy and why GSCC® members are leading the industry toward decarbonization.

  • Article • 4 min read

Steel is the backbone of the world’s infrastructure and an engine for economic growth, job creation, innovation and conservation.

The World Steel Association puts it succinctly: steel is in every aspect of our lives, and it is endlessly recyclable without losing its core properties. Worldsteel estimates that about 2 billion tons of crude steel are produced each year, with another 200 million tons of capacity expected in the coming decade based on announced investments worldwide.

With all that production comes carbon emissions. The International Energy Agency estimates that an average two tons of CO2 are emitted for every ton of steel produced. This accounts for 7-8% of total global carbon emissions.

The climate crisis is creating pressure to reverse this course. The global community’s growing calls for the steel industry to decarbonize is what led us to create the GSCC® in 2022. Last year, we embarked on a collective journey towards meeting the Paris Climate Agreement’s 1.5 degree scenario by 2050 by developing and publishing The Steel Climate Standard. This year, we are developing a process to independently certify our decarbonization progress.

GSCC® Executive Director Adina Renee Adler Visits Nucor Steel Berkeley

The Standard provides a pathway to lower the carbon intensity of steel production and reduce the embedded emissions in the products steelmakers sell to customers.

Low carbon steel is an imperative in the fight against climate change and a sustainable global economy.

Consumer preferences are shifting towards more sustainably-produced goods. From the goods we buy, to the buildings where we live and work, manufacturers are under increasing pressure to publish the carbon intensity of the products they make.

This is the centerpiece of the GSCC®’s Steel Climate Standard. The Standard requires companies to set science-based emission targets for decreasing emissions towards net zero goals set by the signatories of the 2015 Paris Climate Agreement. It also offers a framework for certifying low carbon steel products. Our transparent, science-based and verifiable carbon measurements will enable consumers to know what they are purchasing.

There is an economic incentive for everyone to act. Steelmakers that move toward low-carbon production will find more robust demand for their products. Likewise, manufacturers that source steel from GSCC®-certified suppliers will gain a competitive edge in an increasingly environmentally-conscious market.

The global community is demanding action to lower emissions, with many governments mandating a more rigorous regulatory environment.

The number and diversity of climate policies, laws and regulations already in place or under development will continue to grow. Countries made commitments when they signed the Paris Climate Agreement, and in order to meet their national targets they need to impose mandates on industry.

Regulations will address every facet of the environmental value chain. Raw and secondary material extraction. The transportation and handling of goods. Particulate matter emissions from factories and utilities. Better product design and labelling. Reducing waste and promoting recycling. And improving supply chain transparency and traceability.

While there are obligations on steel producers, the compliance requirements will be exponentially larger for manufacturers of goods that incorporate steel. Thus, low carbon steel production is essential to comply with an increasingly demanding regulatory landscape.

Some steel producers have been early adopters of low carbon manufacturing. They are now in the best position to offer the world a pathway towards a low emissions future. They will also have an easier path to comply with new laws and regulations. Looking ahead, new technologies will lead to even more efficient processes and lower emissions. Early investors in these will benefit again.

GSCC® members are already investing in system changes to lower emissions without being mandated because they believe in the environmental imperative to do so.

The transition to lower emissions steelmaking will require long-term planning in an era of short-term pressure.

Governments, investors and consumers are demanding action with ambitious goals to be accomplished starting in 2030. A Morgan Stanley analysis forecasts that “the entire steelmaking supply chain will need an overhaul” to meet net zero carbon steelmaking goals – with companies needing to invest an average of $6 billion in capital expenditures.

To get there, steelmakers will need to increase their use of affordable renewable energy, invest in green hydrogen to turn carbon-rich iron ore into steelmaking iron (a process known as Direct Reduced Iron), increase the use of steel scrap as a raw material, and transition coal-based BF/BOF production to lower emission processes.

The short-term costs are significant. But there will be long-term benefits in the form of resource and energy efficiency and reduced operational costs – all leading to favorable investment returns, improved consumer confidence and regulatory compliance.

The long-term gains of low carbon steelmaking will spill over into the broader manufacturing ecosystem. Upstream mining and scrap industries will evolve to meet the growing demand for sustainable materials. Steel customers will improve their sourcing and production processes. There will be gains toward a more Circular Economy in which raw materials and goods are reused and recycled, waste is reduced, and smart investments are rewarded.

The GSCC® is leading the transition to low carbon steel production.

We are a coalition of the world’s leading steel companies committed to meeting the 1.5 degree challenge set by the signatories of the Paris Climate Agreement – doing so through our own actions, as well as urging others to join us. The Steel Climate Standard is our framework to do so, and one that applies equally to all steel products and producers regardless of their production technology.

We are collaborating with suppliers and customers toward the shared goal of “truth in advertising” – not just talking about moving to low carbon, but providing the evidence through science-based data, transparent reporting, and third-party verification of emissions. This commitment will enhance our credibility and ensure The Steel Climate Standard delivers on its goals.

We also work with governments, international organizations and civil society to drive a holistic policy approach to address the challenges and embrace the opportunities from steel decarbonization – from both an environmental and economic perspective.

No one can solve the climate crisis alone. Ours is an effort that requires participation across the entire industry, with everyone making investments in transition technologies and supporting the collective global vision of a net zero future.