The steel industry plays a big role in Europe’s energy consumption, but many say green technologies have been sidelined to stay competitive with cheaper, dirtier steel from China. To explore the best way forward, Horizon organised a debate between Dr Klaus Peters, the secretary general of the European Steel Technology Platform (ESTEP), and Wendel Trio, the director of Climate Action Network Europe.
What’s standing in the way of the steel industry becoming more sustainable?
Wendel Trio: ‘When governments reached the Paris Agreement (in December 2015), they took upon themselves a huge challenge to keep (the global) temperature rise well below 2 Celsius and even limit it to 1.5 C. That challenge is bigger for certain sectors than others. For the power sector there are clear alternatives – renewable energy, energy efficiency and so on – the pathway is clear, for the steel industry the pathway isn’t.
The iron and steel industry accounts for between 4 % and 7 % of CO2 emissions globally. The EU is the second largest producer of steel in the world, with an output of over 177 million tonnes of steel a year.
The ULCOS project, supported by the EU, is a consortium of 48 leading players in industry and research aiming to reduce CO2 emissions in the sector by at least 50 % by 2050.
The EU’s 'Clean energy for all Europeans' proposals, also known as the Winter Package and released on 30 November, set out legislative initiatives aimed at supporting the energy transition to a low-carbon society and increasing energy efficiency across European industries.
‘By itself, the steel sector won’t reduce the emissions that are needed in the next 30 to 40 years. There will be need for incentives, both in regulation and in terms of financial support for innovation.’
Dr Klaus Peters: ‘The real challenge for us is to have the foresight of which technology is the most promising and which will be successful for 2040 to 2050 and beyond.
‘All the big players, and even the medium players, are very much involved in developing something that is contributing to this challenge. We have a real basket of initiatives and one of the very big and important ones is HIsarna (an experimental process that saves energy by cutting out one stage of the steelmaking process), but there are significant others as well.
‘We are very open to further investigate how to make waste streams, by-products and the side streams of today into the variable feedstock of tomorrow. Scrap is one element, we are (also) talking product design, eco design, the dismantling of products. Of course we have to find solutions in our processing in order to take back this material, because this approach is significantly different to iron ore (mining). There are no technologically difficult hurdles, these are cost issues, logistic issues and mindset issues.’
How can we overcome the cost issue?
KP: ‘The steel industry cannot take this cost out of profits today, so therefore something has to change. The European steel industry should stay in Europe and not be dislocated to other parts of the world where we would then have the discussion of whether this is beneficial for the global environment.
‘The first step should come from the private sector, from the industry, but there has to be a business case. Regulations have a very decisive impact on the business case and we are very much excited to see the outcomes of the Winter Package (see The Issue) and whether these modifications will foster the European steel sector to make a step forward.'
WT: ‘If we speak about costs, there are of course two sides, there is the cost of innovation that the companies are facing, but there is also a cost of inaction. We know climate change is happening and it’s having a cost. Currently we lack a way to internalise the cost. The EU emissions trading system (EU ETS) is not delivering that at the moment because the prices are far too low.
‘If we speak about costs, there are of course two sides, there is the cost of innovation that the companies are facing, but there is also a cost of inaction.’
Wendel Trio, Director, Climate Action Network Europe
‘Governments should use the income from this instrument to invest in (greener) alternatives, and then look at the sectors where climate action is most urgently needed, and I think the steel sector will be part of those priorities. Unfortunately, this is not happening at the moment, only a small part of those revenues is used for this. Actually the same goes for the industry. The ETS is a source of income for the (European) steel industry because of the windfall profits. A recent study said up to EUR 8 billion (across the EU) went to the industry because of the sale of carbon allowances. Very little of that has been used to invest in alternatives.
‘The steel industry often, or sometimes the steel workers when they protest, claim that environment regulation means they have a competitive disadvantage with China. The current carbon price doesn’t play like that. There are many other market forces that put a number of question marks behind the future of the European steel industry.’
Is competition from regions like China preventing the industry from pursuing greener growth?
KP: ‘Competitiveness is important, but we are not afraid and we are relying on our research and development and innovation capabilities because this is the only chance we have to always be one step ahead.
‘I can see that one window of opportunity will be effectively running smaller sites due to the local energy availability. Then it is more economical to size the steel production to the energy available. It will become an energy discussion in the future because if we want to do something for the environment, to do something with carbon dioxide (CO2), then it is not a question of technology, it’s a question of how to apply the energy to the CO2 (in order to) make something useful (from it). All energy has a cost.’
Is it still realistic that the steel industry will achieve the target of 50 % carbon emission reduction by 2050?
KP: ‘If we come to the full potential of the ULCOS project (Ultra-Low Carbon dioxide Steelmaking – a research project financed by the steel industry), it’s very realistic, but it’s no secret to remind you that a part of the ULCOS story is carbon capture and storage (CCS). With CCS we can go further than the 50 % level.
‘Competitiveness is important, but we are not afraid and we are relying on our research and development and innovation capabilities.’
Dr Klaus Peters, Secretary General, European Steel Technology Platform (ESTEP)
‘Many of these technologies are mature and they can be applied and if you reuse the carbon from the steel perspective, the (carbon) reduction is already at 50 %. The argument then is what is the product you create with the carbon; if it is fuel, will it be burnt later on?
‘There is no reason why we can’t evolve the process, to use the carbon dioxide to do something with a long-term perspective. We already know there is the possibility to bind the carbon within the cement sector.’
WT: ‘CCS methodologies are quite expensive (so) we really want to be clear that we put the limited money where there are little to no alternatives. Sustainable storage capacities where we have a high guarantee of no leakages are limited. We have to be clear that, if we want to store carbon, it’s the best possible use of the limited resources available.
‘I think it is possible to have a sustainable steel industry in Europe. I think it is also needed to have a steel industry in Europe because it’s an important element of innovation. It is needed that decision makers and the steel makers recognise their important role in current greenhouse gas emissions and being part of the solution. That starts with looking at innovation, it also includes supporting the tools on the table and ensuring that they get better, in particular a real improvement of the ETS.’
Under the EU's Emissions Trading System (ETS), a limit is set on the total amount of certain greenhouse gases that can be emitted by companies, and that limit is then reduced over time so that total emissions fall.
Within the limit that has been set, companies bid for emission allowances.
It means that if a company reduces its emissions faster than the limit, it can keep the spare allowances to cover its future needs, or else sell them on.
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