4 For example: retrofitting existing EAF plants for hydrogen-based steel production. In response, decarbonization measures such as establishing or switching to hydrogen-based (H 2) steel production can be implemented either in forthcoming (greenfield) sites or existing (brownfield) facilities. Moreover, long investment cycles of 10 to 15 years, multibillion financing needs, and limited supplier capacities make this issue even more relevant and lock in significant lead times for addressing the decarbonization challenge.ġ4 percent of steel companies’ potential value is at risk if they are unable to decrease their environmental impact
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Consequently, decarbonization should be a top priority for remaining economically competitive and retaining the industry’s license to operate. Results range from 2 percent to 30 percent for individual companies. The weighted average value at risk for the sample is 14 percent of net present value under a 2☌ scenario, where global carbon prices rise to USD 100 per ton of carbon dioxide. Recent studies estimate that the global steel industry may find approximately 14 percent of steel companies’ potential value is at risk if they are unable to decrease their environmental impact. At the same time, global investment firm BlackRock has confirmed its commitment to environmentally responsible business development and sustainable investing. For example, the Institutional Investors Group on Climate Change, a global network with 250-plus investors and over USD 30 trillion in assets under management, has raised expectations for the steel industry to safeguard its future in the face of climate change. Growing investor and public interest in sustainability.This is manifested in carbon dioxide reduction targets, as well as rising carbon dioxide emission prices as outlined in the European Green Deal. Further tightening of carbon emission regulations.
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A trend that has already been observed in various industries, including the auto industry where manufacturers such as Volkswagen or Toyota have the ambitious aim of eliminating carbon emissions completely from their entire value chains (including their suppliers) and taking on a full life cycle perspective. Changing customer requirements and growing demand for carbon-friendly steel products.
This challenge is driven by three key developments that go beyond the Paris Agreement: Consequently, steel players across the globe, and especially in Europe, are increasingly facing a decarbonization challenge. Together, these agreements have led to growing pressure to pursue decarbonization across all industrial sectors.Įvery ton of steel produced in 2018 emitted on average 1.85 tons of carbon dioxide, equating to about 8 percent of global carbon dioxide emissions. Moreover, some nations have pledged to work toward earlier dates. 1 Climate Action Summit 2019, Report of the Secretary-General on the 2019 Climate Action Summit and the Way Forward in 2020, UN.org. In 2019, the United Nations announced that over 60 countries-including the United Kingdom and the European Union (with the exception of Poland)-had committed to carbon neutrality by 2050, although the three principal emitters China, India, and the United States were not among that number. In 2015, the global response to the threat of climate change took a step forward when 190 nations adopted the Paris Agreement. While the industry must adapt to these new circumstances, it can also use them as a chance to safeguard its license to continue operating in the long term. Currently the steel industry is among the three biggest producers of carbon dioxide, with emissions being produced by a limited number of locations steel plants are therefore a good candidate for decarbonization.
However, the industry now needs to cope with pressure to reduce its carbon footprint from both environmental and economic perspectives. Steel is one of the core pillars of today’s society and, as one of the most important engineering and construction materials, it is present in many aspects of our lives.
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