Environmental, social and governance (ESG) investments alongside active environmental protection statutes at all levels of government increasingly are influencing the way we think about steel, and this evolution is bound to affect trade flows and pricing.
Climate stewardship falls on all individuals and businesses, and steel undoubtedly will play an essential role in the global energy transition. Automobiles, renewable energy sites and other industries will need fossil-free steel to achieve carbon neutrality.
The global steel industry produces 7 percent to 9 percent of annual global carbon dioxide (CO2) emissions, and the internal and external pressure on carbon control is changing the way steel is produced. Steelmakers are seeking ways to avoid high-carbon tax schemes on domestic and imported steel while looking to differentiate environmentally friendly steel to consumers. The marketing end is important as it will take some time for green steel to reach cost parity with conventional steel.
These factors, along with self-driven commitments, have boosted decarbonization initiatives by steelmakers. Green steel ventures include the rise of electric arc furnace (EAF) usage, green hydrogen, cleaner energy sources, changes in raw material inputs such as direct-reduced iron and hot-briquetted iron and decreasing the use of coal and coke, among many others.
The movement has given rise to Hybrit, an effort among SSAB, LKAB and Vattenfall that aims to replace coking coal, traditionally needed for ore-based steelmaking, with fossil-free electricity and hydrogen to produce steel with virtually no carbon footprint. It also has led to a push toward a more widely recognized certification of steel plants and products.
The concept is raising some methodology questions.
Phillip Bell, president of the Steel Manufacturers Association (SMA), Washington, says we need to be careful with steel certifications embraced by players in the industry that are allowed to set the standard in global macros. One that has been gaining traction but requires more dissection, he says, is the ResponsibleSteel Standard—the U.K.-based nonprofit organization behind what it describes as the steel industry’s first global multistakeholder standard and certification initiative.
Improvements in steel certification
The ResponsibleSteel Standard (RSS) certification was conceived in response to the need for a universal standard for defining good production practices. The organization has issued certifications to a variety of steelmakers over the last two years, including ArcelorMittal’s European and Brazilian plants. Other entities that were certified include Voestalpine in Austria, Bluescope in Australia, Big River Steel in the U.S. and Posco in South Korea.
ResponsibleSteel says members from all stages of the steel supply chain, civil society and downstream users contributed to the independent certification standard.
However, the SMA argues that various platforms are trying to lead the definition of a lower-carbon future, including ResponsibleSteel and the France-based International Energy Agency (IEA), and are not taking all stakeholders into account. Bell instead promotes a wider discussion to avoid biased conclusions.
“In the present actions to gain a consensus, the global EAF community was excluded in the discussions, development and dissemination of the ResponsibleSteel certification,” he says.
According to Worldsteel, Brussels, steel production by EAFs consumes up to 100 percent scrap, while the blast furnace (BF) route uses up to 30 percent.
End-of-life scrap availability is forecast at 900 million metric tons by 2050. Every metric ton of scrap used for steel production avoids the emission of 1.5 metric tons of carbon dioxide. While scrap cannot replace iron ore and metallics immediately, it is a core aspect of the discussion. In the U.S., which produces more than 70 percent of steel via EAF, Bell contends the certification evaluation cannot follow global trends that produce more steel via BF technologies.
One standard
Bell says the steel industry needs a truly global standard that will accelerate the transition toward lower-emissions steel without a bias toward processes.
He lists the following issues that affect the present certification attempts:
- A standard should focus on reducing emissions, not how steel is made.
- The IEA report and the Responsible- Steel certification contain good ideas but minimize the global EAF community and the important science-based role of scrap-based EAF production in making low-carbon-intensity steel.
- The present platforms and corresponding reports seem to have incorporated little to no input from the global ferrous scrap recycling industries, contrary to the inclusivity needed.
- The current certification appears skewed toward creating a double standard for BF versus EAF production.
- By design, ResponsibleSteel creates a sliding scale. The certification methodology allows high-emissions steelmakers to have higher ceilings for greenhouse gas emissions and penalizes EAF producers.
- The methodology could fall into the greenwashing landscape as it allows companies that use dirtier steelmaking processes to appear cleaner than they truly are. This threatens the integrity of science-based targets.
“We should not allow steel producers to classify their product as green when it has significantly more carbon emissions than other working alternatives,” Bell says, adding that the EAF process is the existing proven way to produce lower-carbon steel. For example, the ResponsibleSteel Standard has a threshold for BF production that is nine times higher than the threshold for the same product set for EAF producers. “The methodology allows two identical steel products to be classified as equally green, but the reality is those manufactured by the BF process produced many more carbon emissions,” Bell says.
The SMA has released an emissions study that concludes scrap-based EAF steel production is more than 75 percent less carbon-intensive than BOF steel production. Recycling metal reduces pollution, saves water and energy resources, reduces waste and prevents the destruction of habitats from mining new ore.
The association does not support a tiered approach to green steel. Instead, the SMA endorses the use of one target that companies are either above, at level with or below. The global conversation must include a certification or labeling process that acknowledges and understands the important role that ferrous scrap plays in the circular economy, Bell says.
Moreover, having one single target instead of multiple targets will incentivize integrated producers to transition to EAF steelmaking.
A level playing field
Many steel companies are accepting subsidies in Asia, Canada and the EU to convert inefficient BOFs to EAF production.
EAF producers in the EU and elsewhere should not be penalized for their production of steel that is already low in carbon intensity. When subsidies are given to BOFs, it takes away the competitive advantage from EAF producers operating independently, the SMA says. For example, Bell says, “In Europe, a country like Turkey would be heavily penalized for its strong EAF use.”
In contrast, U.S. firms are transitioning to EAF technologies without subsidies and have invested more than $22 billion in the past five years to upgrade and modernize their facilities.
Bell says a better certification should include several standards, such as reducing carbon emissions regardless of process; including Scopes 1, 2 and 3 emissions metrics; aligning with a scientific path—the reality is an existing proven steelmaking technology produces lower-carbon steel; and including a global coalition of EAF producers and recyclers.
Bell says the dissection of ResponsibleSteel is timely because the U.S. government is negotiating a global climate arrangement based largely on concepts and methodologies presented in these early certification processes.
“Policymakers ... need to take a step back since 70 to 75 percent of the U.S. domestic steel industry produces steel via EAF,” Bell says. “This is especially important as the Department of Energy, in their decarbonization road map, projects that EAFs will represent 90 percent of all steel production in the U.S. by 2050.”
Recently, the German steel industry submitted a proposal for a uniform definition of green steel that allows for more comparability between the different production routes (EAF, BF) and weaves in the considerations of which investments that first lead to climate-neutral steel can be credited if primarily renewable energies are available, and what standards can hold all market participants to account according to the base rules so that the various paths to transformation can be compared and evaluated. Analysis of its methodology has begun, but it seeks to address the various production routes.
Billy Johnson, chief lobbyist for the Institute of Scrap Recycling Industries (ISRI), Washington, says ISRI is excited to work on a standard to further promote sustainable steel where the recycled materials industry is a partner in its development.
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