Stakeholder
Make use of early-mover advantage in getting access to new markets and buyers willing to pay a green premium for low-CO2 steel, which can offset the larger production costs of emerging production pathways.
Proactively procure low-carbon electricity and hydrogen. The complexity in procuring and securing sufficient renewable electricity that is deemed to be “additional” in the EU poses a challenge that the steel sector will need to navigate.
Assess strategies to access cheap renewable electricity, which can be a key differentiator in the cost structure for electricity-intensive pathways.
When planning to shift to lower carbon technologies, work with industry stakeholders and local communities to create a credible just transition plan to manage social impact.
Actions
Steel producers
Engage with steel producers early to incorporate steel transition plans into load forecasting, as this can lead to significant transmission and distribution grid upgrade requirements.
Deploy renewables to cover new electricity demand from steelmakers and assess flexibility options, including demand side response for both hydrogen and steel production, to allow for a larger share of variable renewable electricity on the grid.
Power & utilities
Policymakers
Carbon pricing is a crucial incentive to level the playing field between pathways with different carbon intensities and, where not yet in place, should be considered by policymakers. In its current form in the EU, it is not sufficient to fully incentivise the switch to pathways with a significantly lower emissions intensity.
Capital support will be required for steel producers transitioning to new production pathways, but some form of operational support, such as carbon contracts for difference, may be equally or more important.
Access to supporting infrastructure will be critical to lower productions costs. Policymakers need to take action to facilitate the quick expansion of supporting infrastructure networks. Expansion of renewable capacity, electric grid upgrades, hydrogen pipelines, and CO2 transport and storage infrastructure will all be required. Policymakers need to strategically prioritise where each will be deployed, acknowledging that a combination of solutions will be required.
Shifting to new production pathways will bring new cost structures and can change the optimal locations for producing steel. Policymakers will need to carefully assess the trade-offs from potential relocation of iron or steel production.
Manage the social impact of technology shifts or relocation in collaboration with the steelmaker by creating a just transition plan with local stakeholders.
As steel producers transition towards low-CO2 steelmaking demand for ‘clean’ raw materials will increase. Raw material suppliers should lower their own emissions, which will give them priority access to low-CO2 steel producers and will in turn allow them to reduce their downstream emissions.
Some iron ore suppliers operate in areas with high potential for cheap renewable energy. Pellet suppliers can consider moving down the value chain to produce green iron and decouple iron and steel production. These can allow them to add value to their products and can lower the total production cost for steel producers.
Raw material suppliers
Early buyers of steel with a low emissions intensity will be able to differentiate their products, lower their value-chain emissions and anticipate policy changes. Buyers need to proactively engage with steel producers to avoid paying a potentially larger green premium for clean steel in the merchant market, as early volumes of clean steel will be scarce.
Smaller buyers that lack purchasing power to engage directly with steel producers can engage in buyers’ initiatives, such as SteelZero.
Steel buyers
Finance sector
Financial players need to increase pressure on producers and phase out direct support to unabated basic oxygen steelmaking.
Financiers can help de-risk first movers and bring production costs down the cost curve. Getting access to capital will be vital for the steel sector to be able to transition towards clean steel. In turn, this will help financial institutions to meet climate-aligned decarbonization targets for their investment portfolio.
