Decarbonisation has become a global imperative and a priority for governments, companies and society at large. This report discusses how the decarbonisation of steel can be accelerated by activating the value chain and how collaboration plays a critical role in making this happen. It also identifies some major barriers and proposes potential solutions to overcome these challenges in order to achieve net-zero carbon emissions.
Towards a low-carbon world: Steel’s route
Steel is a vital resource today, used in all key industries and the development of the global economy. It has one of the highest emissions footprints, accounting for around 10% of global carbon dioxide (CO2) emissions. As a result of the long lifespan of steel production assets, high asset replacement costs and high decarbonisation energy requirements, steel is considered to be one of the six "hard-to-abate" sectors.
The 2015 Paris Agreement on climate change set out targets for major transitions in the key areas of energy and food production, consumption and materials sourcing. Many companies across the steel value chain are reducing their scope 1 and 2 emissions by implementing energy-efficient technologies, electrifying processes and using zero-carbon alternatives. For sectoral decarbonisation to be achieved, the greatest impact is made when companies commit to reducing their Scope 3 emissions, which are indirect emissions associated with their value chain. This applies both to upstream (procurement of materials, assets, services, etc.) and downstream (including transport, waste disposal and processing). To tackle Scope 3 emissions, companies across the steel value chain are mutually dependent on one another to set firm emission reduction targets.
A critical factor for success: Decarbonising steel production
In the steel value chain1 , iron and steel manufacturing via a blast furnace and basic oxygen furnace represents around 95% of the total greenhouse gas emissions and the remaining proportion of emissions originates from mining (4%) and logistics (1%). Global steel production is relatively concentrated, presenting a unique opportunity for the largest steel producers to make a far-reaching impact by decarbonising their operations. As one construction company stated: “85% of our company’s total emissions are Scope 3 emissions, of which the bulk originates from steel production.” Therefore, if steel producers take action to decarbonise, it will contribute to climate targets of companies across the value chain.
There are four major pathways to reducing primary steel production's carbon footprint and if implemented successfully, each of them could reduce emissions by at least 60%. Decarbonising the sector involves overcoming several challenges—the most significant being the lack of affordable green energy supply, underdeveloped environmental policies and the need for technological innovation to process varying iron ore quality. This paper suggests clear strategies and solutions for overcoming these barriers with far-reaching potential in progressing the energy transition and stimulating the green economy. With collaboration across the industry, innovation and ambition, these strategies will significantly reduce steel’s net emissions.
1 Excluding some steel finishing and end-market applications.
There is tremendous appetite across the steel value chain to decarbonise. The technological pathways are clear, it is now all about synchronising strategies and investments
-Vincent Oomes, Partner, Monitor Deloitte
A call to action
To enact change, one thing is certain: no one company can decarbonise alone. To successfully decarbonise, core stakeholders in the mining and steel production value chain must work together with end markets such as the automotive and construction industries. A coalition with partners across the value chain in addition to support from financial institutions as well as governments will be required to trigger collective action, spark global and local conversation, drive increased public and private investment, and deliver tangible results.
Through interviews with more than 100 senior executives representing 57 organisations involved in the key parts of the steel industry, we have identified the key barriers to decarbonising steel and practical solutions to accelerate the sector’s transition to net-zero. Highlights from the research include:
Connected for a new energy future
Energy is the pulse of our day-to-day life and how we create and use it is evolving rapidly. At Deloitte, we understand the opportunities the Future of Energy brings and the importance of connecting ecosystem players, innovators, regulators and thought leaders to create a new energy world that is sustainable and abundant. In collaboration with Shell and working closely with many leaders of the steel industry, Deloitte explores the promise of decarbonising the industry. We truly believe that as ecosystem players connect and adopt the right mind-set, the positive impact we make can be accelerated.
This report was produced in collaboration with Shell