The steel sector emits more than 4 billion tonnes CO2 equivalent of greenhouse gases every year, 90% of which is from coal-based steelmaking. That has to stop for the world to stand any chance of limiting climate change to 2 degrees, let alone 1.5.
Steelmakers know this. Governments know this. Civil society knows this. The only question is how to make it happen.
A Montreal Protocol for steel could be the answer. A ‘Steel Protocol’ would take out 10% of coal mining. It would be a breakthrough for global decarbonisation. With support, the Brazilian Presidency could deliver it at COP30 in Belem in 2025.
The Montreal Protocol – or the Montreal Protocol on Substances that Deplete the Ozone Layer, to give it its full name – has been described by former UN Secretary-General Kofi Annan as “perhaps the single most successful international agreement to date”. Signed in 1987, effective since 1989, and still going strong. What has made it so successful, and why is it a good model for steelmaking?
Firstly, there was a clearly defined problem, with a clear boundary, and a clear policy solution: to phase out chlorofluorocarbons (CFCs).
Secondly, there was a sense of public peril and urgency: the ‘ozone hole’ was getting larger, with the prospect of increasing skin cancers and cataracts.
Thirdly, viable alternatives existed in the form of non-CFC refrigerants – what was needed was a strong policy framework to ensure their commercial uptake.
And fourthly, the agreement itself was well-structured, with clear phase-out dates and targeted transitional support.
All these factors apply to steel:
- The problem: 70% of the world’s steel is made in blast furnaces powered by coal. These are responsible for 90% of the steel sector’s greenhouse gas emissions – and constitute 9% of global CO2 emissions.
- The peril: forest fires, hurricanes, flooding, drought – climate change is here. People are dying, and it’s only going to get worse
- The solution: coal-based blast furnaces have to be shut down or – if feasible – their emissions have to be captured and permanently kept from entering the atmosphere
- The urgency: we have until 2050 or 2060, depending on one’s tolerance for risk, for this to take place.
- Viable alternatives: there’s a smorgasbord of technical options to achieve near zero emission steel from iron ore, from hydrogen-based DRI, direct electrolysis, to biocarbon-based reduction. But without the right policy framework, they are not commercially competitive on the required timeline and scale.
Which is why the final factor, a well-structured agreement with financial support for the transition, is essential. A ‘Steel Protocol’ would have four pillars:
Pillar One: Production. Signatories agree to phase out the production or use of unmitigated coal-based steel by an end date around 2050. The construction of new coal-based furnaces, and the relining of existing blast furnaces would be prohibited in signatory countries as soon as the Protocol enters into force.
Pillar Two: Trade. Signatories agree not to import steel that has higher emissions than the IEA ‘near zero’ level1, as recommended to the G7, after the end date.
Pillar Three: A multilateral fund. A multilateral fund is established to support the phase out of coal-based production, and the phase in of primary iron and steel production using low emission technologies.
Pillar Four: Monitoring. Funding is tied to standardised GHG emissions measurement and disclosure requirements for recipients.
Why wait until 2050 to phase out coal-based blast furnaces? Because blast furnaces are a huge capital investment. Close off the prospect of a long-term return, and it no longer makes sense to construct new furnaces, unless they will be capable of delivering near zero emission steel by 2050. It makes new, low emission iron and steelmaking commercially competitive. It removes the current uncertainty for investors and steelmakers alike, and brings in private finance.
What about the geopolitics? 90% of steel production comes from just 10 countries: Brazil, Russia, India and China, plus the US, South Korea, Japan, Germany, Türkiye and Iran – together with the European Union. Most important would be China, with over 50% of global production.
All those countries have an interest in mitigating climate change, of course, and there is no choice but to phase out coal-based steelmaking to achieve this. But perhaps surprisingly, there may also be political space for an agreement.
Brazil is a world leader in the production of low carbon steel using plantation-grown charcoal. Steelmaking in industrialised countries, and including China, is in transition towards increased scrap use – by 2050, roughly 50% of all steelmaking will be from scrap. Blast furnace over-capacity needs to be addressed to improve the financial viability of next generation, low carbon steel production. India needs to replace its coal-based furnaces with new, low-emission production as a matter of urgency. Targetted funding is needed to ease the transition, and attract commercial finance.
Former UN secretary-general Ban Ki-moon and former Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC) and others signed an open letter to the current UNFCCC and its Parties last week2, reported as saying that, ‘It is now clear that the COP is no longer fit for purpose’.
Is that true?
The European Union, Germany, Japan, and Türkiye are already collaborating within the COP process on a so-called ‘Breakthrough Agenda” for steel, set up at COP26. It’s just 12 months to COP30 in Belem.
A global treaty to phase out 10% of the world’s consumption of coal – that would be a real breakthrough.
Over to you, Brazil.
Footnotes