Awareness and information availability

Background

Transitioning to low-emissions and green steel requires a certain transparency and availability of information, especially for market incentives to work effectively. Each actor needs different types of information to evaluate the market, and a lack of information or awareness can greatly hamper the progress of the transition.

Steel Producers: Steel companies will need to make many decisions about future production pathways and investments in the upcoming years. One of the reasons they struggle to do so quickly is because of the many ambiguities caused by imperfect information. Transparent long-term strategies by governments and consistency in policy direction can make planning easier. If there is no transparency about the financial opportunities available or market security provided for low-emissions and green steel companies, fewer will opt for such investments. Additional essential information for good planning by steel producers is the availability of new technologies, as well as what changes in infrastructure, hiring, and training their implementation requires. There should be a continuous exchange of information about the options plant owners have, political decisions made, and how regulations will impact the different pathways’ economic outcomes, so that plant owners can create financially-feasible plans to achieve decarbonization.

Consumers and Supply Chains: To decarbonize their own supply chains, the main consumer industries of steel need to be aware of the emissions inherent to the steel products they buy. This helps them understand the need to switch to low-emissions steel products in the first place, the demand for and procurement of which may strengthen the market. Although many have gained an increased understanding of the matter, there is still inconsistency in the availability of information about different types of low-emissions steel. The absence of a consistent certification, as well as definitions and distinctions between low-emissions steels exacerbates this inconsistency, as it is more difficult to easily compare the emissions associated with each product. Without this information, buyers can struggle to identify steel made under the lowest emissions and may continue to buy high-emissions steel, perpetuating the demand for non-green products. The imperfect information thus creates a market failure.

On a civil society level, too, the lack of awareness can prevent an effective change in consumer behavior. Few people are aware of the carbon intensities of steel or what type of steel is used in the goods they buy. With greater awareness of the climate issues associated with steel and the types of low-emissions steel that exist, as well as better transparency of the types of steel used in goods such as cars, machines, and household wares, individuals have the chance to make low-emissions steel a consideration in their purchasing decisions. Opting for low-CO2 steel sends a clear signal to producers, who are then incentivized to decarbonize their supply chains and strengthen the low-emissions and green steel market.

Lastly, there is a lack of awareness of supply chains. A steel transition requires better building codes, product designs, and infrastructure to reduce steel demand through efficient designs and improve recycling rates. A better understanding of the necessity for related changes, how to achieve them, and who to collaborate with to do so will accelerate changes.

Governments: For governments to create effective policies, they need to have an understanding of how their country’s industry is producing steel, who is causing what emissions per metric tonnes of steel produced, and what the challenges to the national companies’ transitions are. They also need to be aware of opportunities for change. However, such information is not often widely and easily available.

When proposing the construction of a new iron or steel plant, companies are often not required to report the production pathway they choose, only how much steel they will produce once operating. That makes it difficult for governments to limit the construction of carbon-intensive steel plants, or to create other regulatory policies that would require such projects to reduce their emissions through other measures.

Some governments seem to lack an in-depth understanding of the need to decarbonize the steel industry through changes on many levels, and not just within the industry itself. Examples include the necessity for regulations in building codes and engineering and construction practices, as well as economic incentives for steel consumers to change their product designs and procurement choices to enable a fast and effective transition of the steel industry. At the moment, many countries have no specific steel decarbonization target or plan for how to achieve it. Instead, there are mainly broad ideas that serve merely as guidelines. Making a detailed plan should, therefore, be a priority for each country. That would require a deep understanding of the interconnection between steel producers, steel consumers, the market, and political action, to develop policies that identify leverage points and address systemic challenges.

Several organizations have started to acknowledge gaps in information and have begun tracking estimated emissions of the global steel fleet, as well as existing and planned plants. This includes, for example, the Global Steel Plant Tracker, Global Blast Furnace Tracker, and the Green Steel Tracker. Nevertheless, governments may want to develop further structures to report steel production and emissions, to improve their understanding of the national fleet, and to understand how to best support it in its transition. Even further, they may want to identify other organizations working on the various challenges to steel transition, in order to create effective collaborative partnerships. International competitiveness must be ensured, by increasing awareness of the strategies other countries choose to decarbonize their own industries, for example.

Financial Institutions: The underreporting of steel production types and the respective emissions created also make it more difficult for public and private institutions to make investment decisions. At the moment, those wanting to increase financial access for low-emissions companies need to rely on accurate self-reporting of emissions or low-emissions certifications. The Science-Based Target initiative (SBTi) is one such certification, vouching that companies have created and committed to science-based reduction targets. However, it is difficult to identify which institutions met their announced goals or to evaluate companies not yet part of such initiatives. A globally-implemented and standardized definition of green steel could overcome this difficulty, by making company steel emissions more transparent, as well as a tool for investment decisions. Reduced investment opportunities for carbon-intensive steelmaking — and increasing opportunities for low-emissions and green steel — then function as market incentives to transition.

Despite differences across contexts, this highlights that higher information availability among stakeholders can improve decision-making processes to better support a green steel transition.

Policy Action

Policy targets to promote clarity on the decarbonization pathway include:

• Every country should create and publish a specific national steel decarbonization strategy, highlighting pathways on a sectoral, national, and regional level that create clarity for steel producers and other relevant stakeholders. It should include guidance on the technologies that will be accepted and when they are expected to mature (including any requirements for their implementation); infrastructure and resources that will be available and their cost; future regulations and costs of carbon-intensive steel; government low-emissions steel procurement plans; regional competitive advantages; interim targets and milestone events; investment, infrastructure, labor, and regulatory needs; and any other information that can help steel producers plan ahead and make transition choices.
  • While each country will need to make a location-specific analysis, it is possible to generally orient toward publicly-available steel decarbonization pathways. Some of the more recent pathways include the IEA’s Iron and Steel Technology Roadmap, the IDDRI’s Net Zero Steel Project, several reports by McKinsey & Company, OECD’s “Low and Zero emissions in the steel and cement industries” report, the “Net Zero steel initiative” by Mission Possible Partnership, and reports by the World Steel Association.
• Enforce labeling, certification, and standards to enable the functioning of market incentives.

Policy targets to enhance awareness and information exchange include:

• Identify the stakeholders working on steel decarbonization and addressing its various challenges, to facilitate collaboration, information exchange, and best-practice sharing. Examples for ensuring their collaboration, for example through incubator programs, steel industry associations, and innovation research networks.
• Increase and improve verifiable data collection and reporting by steel producers, including data about the production pathways used, the capacity and yields of a plant, underutilization rates, the fuel and resources used during operation and subsequent emissions released, energy efficiency and carbon reduction technologies implemented, decarbonization strategies and performance evaluation, etc. Data collection and monitoring should also target the value chains involving steel.
• Improve public engagement and education, e.g., through campaigns about the significance of the steel transition, decarbonization choices made, and how each stakeholder can participate in the process. This could include training, smart designs, collaborations, etc., as well as awareness campaigns for all actors along the steel supply chain, who need to know what options they have and costs they face for a green transition.
• Facilitate the development of trading platforms for low-emissions and green steel, in collaboration with steel producers and consumers.
• Create and publish green finance opportunities, investment schemes, and taxonomies.
• Establish international forums to exchange information about technologies, best practices, climate finance, and strategies to increase awareness and trade.

Examples and Case Studies

China’s Iron and Steel Environmental Product Declaration

EUROFER Low Carbon Steel Roadmap

Scrap Metal Exchange Network

External Links

IEA Iron and Steel Technology Roadmap

Global Energy Monitor Steel Plant Tracker

Green Steel Tracker