Energy Intensive Industries: Decision making for a low-carbon future - The case of steel

By Peter Wooders on December 18, 2012

Steel remains a ubiquitous product that is fundamental to the world economy. Greenhouse gas emissions from steel are projected to increase globally.

There is, at present, little firm evidence that current differential carbon pricing policies have altered emission trends. The cost of emissions allowances under the European Union Emission Trading System is significant, however, it is less than the differences in average production costs between key steelmaking regions. Far higher differences in relative production costs could result if one or a limited number of countries decided to make significantly deeper reductions in production emissions than those that would occur from using the best available current technology.

In steelmaking, we cannot state with certainty that there is any breakthrough technology that would significantly reduce greenhouse gas emissions and that could be immediately deployed on a widespread scale. Furthermore, it is not clear that current research, development, demonstration and deployment (RDD&D) arrangements, under current carbon costs, can quickly develop and implement the breakthrough technologies that the steel industry will need if it is to take its full place within the low-carbon economy.

Scaling up RDD&D activities such that breakthrough technologies are developed and implemented as quickly as possible is likely to require a more collaborative approach between the key countries that produce steel. A life-cycle approach to use and disposal from upstream mining could ensure the benefits of steel to the low-carbon economy are not disincentivized. There is a need to debate and plan for the steps needed if deep cuts in the longer term are to be achieved. A "coalition of the willing" may be the best way forward in what is an internationally and nationally competitive steel market. The challenge of reconciling environmental performance while taking account of competitiveness and leakage concerns remains fundamental to how the steel sector could become part of the low-carbon economy. Forums are needed to take the debate forward.

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IISD, 2012