According to the latest report by the Global Energy Monitor (GEM), the decarbonization trend in the global steel industry is facing serious challenges; challenges whose root cause lies in the continued development of coal-based capacities and the slow investment in clean technologies.
According to this report, which was also covered by Bloomberg, currently, around 319 million tons of annual coal-fired blast furnace capacity is under development worldwide; a figure that has increased by 5 percent compared to last year. In addition, around 80 million tons of existing capacity is being rebuilt. Meanwhile, the total capacity to be decommissioned in the coming years is estimated to be only 141 million tons. Based on this, it is predicted that global blast furnace capacity will increase by around 88 million tons by 2035.
The steel industry currently accounts for around 11 percent of global carbon dioxide emissions, with China and India having the largest share. Although low-carbon technologies such as Electric Arc Furnace (EAF) and Direct Reduced Iron (DRI) are more environmentally friendly, their development has not been able to keep pace with the expansion of coal-based production.
Based on the report, the share of electric arc furnaces in global steel capacity increased by only one percentage point last year to 34 percent. In China, the world’s largest steel producer, the industry accounts for around 17 percent of the country’s total carbon emissions. Therefore, the slow pace of structural transformation in China’s steel industry has become one of the major obstacles to reducing global greenhouse gas emissions.
GEM’s analysis shows that the prospect of gradually phasing out fossil fuels from the steel production chain is not very promising under current conditions. The institution emphasizes that without decisive and effective actions by China and India, achieving global decarbonization goals in this industry will face serious difficulties. This is while these two countries alone account for 86 percent of the world’s new coal-fired blast furnace capacity under development.
In contrast, some countries have tried to facilitate the industry’s transition to low-carbon technologies by providing supportive incentives. In this regard, Germany has announced that it will allocate 5 billion euros in financial aid to support energy-intensive industries in adopting low-carbon technologies. Notably, this program includes Carbon Capture and Storage (CCS) technologies for the first time.
Meanwhile, ArcelorMittal has revised its long-term decarbonization strategy and acknowledged that the energy transition in the steel industry is much more complex than previously estimated. The company has announced that by 2030, and based on projects with finalized financing, it aims to reduce its carbon intensity in Scope 1 and Scope 2 areas by around 10 percent compared to 2018; a goal that analysts consider more conservative than previous plans.