Reducing GHG emissions from steel, one of the most widely used industrial materials, is a critical part of the global challenge of maintaining global temperatures to 1.5˚C. According to the U.S. Energy Information Administration, the iron and steel sector accounts for 7 percent of global CO2 emissions due to its significant use of fossil fuels, heavy industrial process emissions, and power use. By 2050, demand for steel is expected to increase by more than one-third, posing the significant challenge of decoupling emissions from the sector’s growth.

The steel industry faces both risks and opportunities in the global transition to net-zero emissions. Long-lived capital-intensive assets typically last 30 to 40 years, which means steel companies risk asset stranding if investments are not compatible with low-carbon technologies. Companies that start mapping optimal climate transition pathways, including making tangible investments in operational efficiencies and low-carbon technologies, will ensure they remain resilient and relevant.

Similarly, companies that innovate green steel products will attain a competitive advantage as customers shift to procure steel from low-emission sources. Demand for green steel is growing because manufacturers with net-zero targets seek to reduce the embodied carbon of products in buildings, planes, automobiles and other heavy machinery. For example, Volvo, Ford and GM all aim to secure low-carbon steel. Industry coalitions such as SteelZero, Responsible Steel, and the Net Zero Steel Initiative will supercharge both the demand and supply-side shift to net-zero steel.

Beyond market risk, the regulatory landscape is rapidly evolving. Companies increasingly face more rigorous standards for disclosing emissions and setting targets. As members of a high emitting sector, steel companies face increased risk from policies with carbon pricing mechanisms, now being discussed in Europe. For example, a recent study about steel company exposure to carbon prices estimates found that the global steel industry may risk 14 percent of potential value if it cannot decrease its impact. On the other hand, policies such as the Inflation Reduction Act increasingly provide support to companies in hard to abate industries, such as steel, that are ready to adapt.

Setting net zero targets is one key step in managing GHG emissions by providing an essential framework for effective short and long-term decisions with a focus on carbon reduction. This year, As You Sow has had productive engagements and achieved commitments regarding net-zero transition planning with steel value chain companies including Cleveland-Cliffs, Olympic Steel, Ryerson and ATI.

Daniel Stewart
Energy and Climate Program Manager, As You Sow

Kelly Poole
Energy and Climate Associate, As You Sow