Accountability to steel decarbonization

Background

Although an increasing number of countries and steel producers have announced their decarbonization targets, few measures exist to ensure that such pledges are being followed by action. Less than half (45%) of the 20 largest steel producers (28.9% of global capacity) have created net-zero strategies. Even fewer have a detailed plan to achieve their targets. In many countries, there are rarely even consequences for steel companies that do not fulfill their CO2 goals. This poses a challenge: Often the simple announcement of ambitious climate targets improves a steel company’s access to funding and public perception, a fact that has led to a higher number of announcements in the last few years. However, there are no accountability measures that ensure such plans are actually implemented, making market incentives less effective and slowing the transition.

In 2019, the World Steel Association created the “step up” initiative to support steel producers in improving their raw material, energy, and process efficiency, which could reduce up to 20% of carbon emissions. While such initiatives are essential to make technological developments and opportunities for CO2 reductions more transparent and known within the industry, they are usually voluntary. The lack of commitment to implement existing technologies makes it difficult to develop incentives and punishments that could push steel producers to meet their targets in a timely manner.

On a political level, too, the lack of accountability poses a problem: Even if countries pledge extensive reductions in BF-BOF capacity and emissions more generally, there are few consequences for deviating from such plans. China, for example, vowed that 60% of its steel capacity would be upgraded to reduce pollution and emissions levels. They also started identifying underutilized plants to reduce emissions caused by their high levels of overcapacity. But despite such promises, they continue to invest in new BF-BOF steel plants and have missed both their plant upgrading and emissions targets. For a successful transition, we need to not only ensure that more companies and countries commit to timely decarbonizations, but also develop accountability measures that ensure the targets are met.

Policy Action

At this point, there are few examples available for policy targets addressing the accountability of countries and companies.

Policy targets to improve international cooperation and accountability include:

• Create and ratify a binding international agreement between major steelmaking countries and companies to ensure multilateral commitment and accountability to rapid steel decarbonization. This could take the form of a climate club, for example, and should include a definition of green steel, a certification and tracking framework, and the commitment not to build BF-BOF plants without CCUS past 2025.
• Identify how wealthy countries can support and incentivize other countries in creating and achieving steel decarbonization pathways, e.g., through financial investments into infrastructure, energy production systems, trade of relevant resources, information and training, etc. This support should be enforced through bilateral and multilateral agreements.
• Increase the security of steel trade to shift political preferences towards trade rather than national capacity expansion. A commitment to not use tariffs and border taxes on green steel during the energy transition may support such a goal.
• Consider creating consumption-based regulations for materials going into end-use products (e.g., cars). These regulations could include carbon taxes, gradually declining caps on end-product emissions, or mandates for low-emissions usage shares.
• Establish international forums to exchange information about technologies, best practices, climate finance, and strategies to increase awareness and trade.

Examples and Case Studies

Science-Based Target Initiative

World Steel Association “Step Up” Initiative

External Links

Accountability Mechanisms in Climate Change Framework Laws

UN Credibility and Accountability of Net Zero Emissions Commitments of Non-State Entities