Carbon capture utilization and storage can provide a transitional solution to European steelmakers as the industry looks to cut carbon dioxide emissions. However, a final solution for achieving net-zero steel production will depend on how the steel is produced and the location of the mill, analysts with S&P Global Commodity Insights said June 8.
In a webinar discussing the potential use of CCUS to decarbonize the steel and cement industries, analysts from S&P Global’s Clean Energy Technology Group said that while these sectors are among the top emitters of industrial CO2, they also are core pillars of today’s society, being two of the most important engineering and construction materials. Combined, global steel and cement production contributes to 13% of global CO2 emissions, representing a major challenge for global net-zero emissions targets, with major steelmakers targeting net-zero emissions by 2050.
To achieve emissions reductions above 80% in Europe’s steel industry, currently three options are the most attractive: hydrogen, natural gas with CCUS in DRI-EAF steelmaking, or utilizing steel scrap, said Paola Perez Pena, principal research analyst at S&P Global. However, she noted that scrap has some limitations, depending on the region.
CCUS only part of solution
The top three steel producers in Europe are considering CCUS to reduce emissions but are also exploring hydrogen-based technologies as part of the solution, Perez Pena said.
In Europe, carbon emissions trading system allowances will make multiple decarbonization routes economical to replace blast furnace and basic oxygen furnace production by 2030, but only hydrogen will provide deep decarbonization, she said.
“Although CCUS is one of the technologies that the steel industry is evaluating, the complexity of the capture process for this industry is one of the big challenges since the most common steel production process has multiple CO2 sources,” Perez Pena said.
Steel production via blast furnace is the most carbon intensive method and is the most widely utilized method of production in Europe currently.
“As the predominant production method of this industry is the conventional coal-dependent blast furnace process, the need to assess alternative breakthrough technologies to reduce CO2 emissions is high,” Perez Pena said.
However, the decarbonization pathway of individual steelmakers will depend on which production process is being utilized. As a result, it is important that flexibility in the choice of decarbonization technologies is maintained to account for the differences in regional characteristics, including natural resources and infrastructure, she said.
Government support key to decarbonization
The EU steel industry has collectively committed to reduce emissions by 30% by 2030 versus 2021 but is seeking ways for this to be achieved as cost efficiently as possible.
Eurofer, the European Steel Association, is advocating for greenhouse gas emissions benchmark-based free allocation of CO2 allowances, compensation of indirect costs and complementary carbon adjustment as the elements that will help through the transition; the EU parliament is expected to vote on its proposals soon.
Currently, the steel and cement industries account for 5% of the current CCUS pipeline of large-scale projects, mainly in Europe.
“Although these numbers seem small in the overall pipeline of projects, this is a significant step ahead,” Perez Pena said.
While China accounts for more than 55% of all global steel production, Europe is one of the first regions facing the decarbonization challenge as carbon regulations increase in the region, Perez Pena said. Changing customer demand and growing investor and public interest in sustainability are further driving the need to decarbonize.
An analysis by the Clean Energy Technology Group found that steel can decarbonize at a lower premium than cement, but the right conditions need to exist for steelmakers.
The production premium for steel could go up to 15% for the European steel sector. However, when factoring in paying for the cost of carbon emitted, producing steel with some decarbonization solutions could be cheaper in some cases, based on 2030 estimates assuming an ETS price above $100/mt, Perez Pena said.
“Given how competitive the market is and the thin industry margins, decarbonization is not easy for business and governments will need to provide the right conditions in place to make sure the domestic industry is not destroyed,” she said.
— Justine Coyne