Our decarbonisation of the steel industry research has found that key policy options for the government to drive green steelmaking include lowering industrial electricity prices (the UK has the highest in Europe), removing discrepancies between the cost of greenhouse gas emissions for steelmakers based on the level of their emissions associated with electricity consumption, and implementing a carbon border adjustment mechanism.
Short and long-term options for decarbonisation
In the steel sector, our research shows that retrofit options have the highest short-term mitigation potential, whilst the most likely options for complete decarbonisation are hydrogen direct reduction of iron and electric arc furnaces, which have lower carbon emissions and costs than carbon capture and storage-based options if low-carbon electricity is used. Over a typical project lifetime, this could already be a lower cost option than blast furnace relining if steel producers are exposed to the full cost of their carbon emissions over a reasonable timescale. Acting soon is important, as once a decision is made to reline a blast furnace and return this to service, carbon-intensive ironmaking would be locked-in for a decade or more. Increased scrap use in steelmaking is potentially attractive as it makes greater use of electric arc furnaces, but requires better quantification of its whole system benefits and integration with other process options.
Our research also shows that ultra-high temperature heat pumps could provide meaningful cost reductions when used to preheat process gases, while reducing energy demand and air pollution.
Need for financial support to the UK steel industry
Our research concludes that unless the government provides significant financial support to the UK steel industry and improves the policy environment around green steelmaking, UK steel manufacturers will struggle to decarbonise their operations while maintaining international competitiveness. UK steel producers and manufacturers interviewed for our research felt that they cannot decarbonise their operations without government assistance, pointing to energy costs, international competition, and the significant investment required.
There is a serious risk of UK steel production being moved overseas, considerably reducing the control that we have over decarbonisation and security of supply. If this occurs, the costs of reaching net-zero emissions from UK steel consumption could be needlessly high in terms of stranded assets and job losses.
Policy recommendations for green steelmaking
Our research concludes that the government should consider socialising the cost of renewable levies and network maintenance, or moving them from electricity to gas, and lay out steps to expose industry to the full cost of its greenhouse gas emissions while preventing carbon leakage (such as developing a carbon border adjustment mechanism, to be phased in as emissions trading scheme free allowances are phased out). There is a need to foster internal demand for steel produced by decarbonised routes and work towards consensus between the stakeholders involved in the process, rather than government expecting industry to act and vice versa.
Our research also concludes that the government should provide funding towards the development of a zero emissions steel plant based on green hydrogen, direct reduction of iron, and electric arc furnaces. This could be a collaboration between the public and private sectors.
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