How do we produce green steel?

The steel industry is crucial for the global economy and the energy transition, but it is also highly polluting. Steel production is responsible for 7% of global greenhouse gas (GHG) emissions. To achieve a climate-neutral economy by 2050, it is essential to switch to green steel. So what is green steel, how can we make steel production more sustainable, and what are the obstacles? We spoke to energy transition specialist Eli Elderkamp of RaboResearch, who wrote a three-part series on this topic.

Elderkamp previously worked at Tata Steel, the largest steel factory of the Netherlands. With two blast furnaces and an oxygen steel plant, Tata annually produces between 6 and 7 million tons of steel in IJmuiden. Elderkamp explains that European steel production has remained relatively stable since the 1960s, while it has increased significantly in Asia, particularly in China. "China now produces more than half of all steel in the world, while India, the second-largest producer, accounts for less than 10% of the total production. For comparison, European steel production accounts for 8%. The explosive growth of steel production in China has led to tensions and trade wars, and the discussion about unfair competition from China has been intense, especially since the 2008 financial crisis."

The steel sector is responsible for 7% of the total global CO2 emissions, the researcher continues. "That is more than the emissions from all land freight transport. To achieve the national climate goals resulting from the Paris Agreement, we are highly dependent on the steel sector’s plans to drastically reduce emissions. But in addition to its CO2 impact on the climate, the steel industry also has other emissions that affect the environment, such as (fine) dust containing heavy metals that worsen air quality when airborne and can disperse with negative consequences for public health."

The industry is urgently looking for ways to transition to green steel production and reduce emissions as much as possible. Elderkamp lists three strategies to reduce GHG emissions: "Reducing the use of steel and increasing reuse and recycling by making fully circular and secondary steel with renewable electricity, developing steel production from iron ore with new emission-reducing techniques such as the use of hydrogen, and capturing and storing emissions that still arise."

According to the researcher, the first strategy is the only one that should remain in a sustainable circular economy long-term. "But this strategy is currently only able to make a part of the production emission-free, as there is not enough scrap available to fully meet the still-increasing demand for steel. Moreover, the scrap that becomes available is usually not pure enough for the production of high-quality types of steel. Once the supply of scrap that can be recycled without loss of quality is equal to the total demand for steel, the use of iron ore will no longer be necessary. The Netherlands does not currently produce secondary steel by recycling scrap, but plans have been announced. For the time being, the two other strategies are necessary to meet the climate goals. These strategies can also be combined in a new technology that captures the remaining emissions."

One possible route to sustainable steel production is the use of green hydrogen. Elderkamp emphasizes that this is a sensitive issue. "The use of green hydrogen indirectly puts a significant strain on the green electricity that will become available in the coming years, and this electricity is also needed for other parts of the energy transition. From an energy perspective, it is more efficient to use green electricity to replace grey electricity, or for applications that still use fossil fuels but are easy to electrify. Applications that indirectly use green electricity through the use of green hydrogen are therefore often less effective in reducing emissions from the system as a whole."

According to Elderkamp, the storage of CO2 can also make a significant contribution, but this is subject to some important conditions. "It must be possible to physically remove the captured CO2 and deliver it to a party that can facilitate storage. One option for storage is empty natural gas fields. CO2 can be captured from the blast furnace gas at existing blast furnaces. Many steel factories plan to replace their blast furnaces step by step between now and 2050 with new factories that run on hydrogen. If there is a structural or temporary shortage of hydrogen, these factories can run on natural gas. In this case, CO2 can be captured and stored."

In addition to the technology itself, the financing of green steel is still a hot topic. Elderkamp emphasizes that sustainability projects of this scale require enormous amounts of capital. "Due to the long investment cycles, the decisions made now will determine the possibilities and limitations in the production of green steel for decades to come. Many steel companies are looking to national governments for support. These governments are under great pressure to make the necessary transition possible, and closure of steel factories remains a sensitive issue. Various European governments have therefore promised subsidies for green steel. In Germany, almost €3 billion in subsidies has been promised to various steel companies. Making green steel is not only a matter of technology but also of balancing all the interests surrounding the steel sector. Consider, for example, the importance of autonomy in the manufacturing industry, which leads to global trade wars, overproduction, and pressure on producers' margins. However, the impact of steel on the climate and the environment is so significant that investments in cleaner production can no longer be postponed."