Shaping a Greener Future for Steel Production

The Challenges of Coal in Steel Production

Burning coal to generate power has become increasingly uneconomical, prompting the previous administration to implement measures to keep the industry afloat. However, despite its decline in energy production, coal still holds a significant place in the steelmaking process. This is because the production of primary iron for steel accounts for over 10% of global greenhouse-gas emissions. Most of these emissions come from blast furnaces, where coal is used to remove oxygen from iron ore, resulting in both iron and carbon dioxide as byproducts.

Alternatives to Traditional Steelmaking

There are more sustainable ways to produce steel. One approach is to reduce the need for new iron altogether. Since steel is 100% recyclable, over one-fifth of the global supply already comes from recycled scrap. Recycling requires only electricity, making it possible to envision a circular economy where renewable energy sources like wind turbines power the recycling process. This method is already economically viable in regions such as the United States and Europe, but it remains less practical in fast-growing Asian economies due to limited access to scrap steel.

Another alternative is using natural gas instead of coal. Although only about 7% of global steel is produced this way, it presents a pathway to near-zero emissions by replacing gas with green hydrogen. This transition could significantly reduce the environmental impact of steel production.

Pioneering Green Steel Projects

A notable example of this shift is the Swedish startup Stegra, which broke ground on the world's first "deep green" steel plant in 2022. The company aims to produce five million tonnes of low-carbon steel annually by 2030, an ambitious goal that is achievable under supportive policy conditions. Similar projects are emerging globally, signaling a promising future for low-carbon steel production.

Overcoming the Challenges

Despite these advancements, the transition to green steel will not be easy. Stegra’s target of five million tonnes pales in comparison to the 1.5 billion tonnes of coal-based steel produced today. For every new green steel plant being planned, more than two traditional plants are also in development. Unlike coal power plants, coal-powered blast furnaces remain economically attractive unless CO2 is priced appropriately. The European Union has started addressing this issue through its emissions-trading system, charging polluters around US$94 per tonne of CO2. However, steel producers in countries like China and India face little to no carbon pricing.

The Role of Methane in Steel Emissions

In addition to CO2, methane plays a critical role in climate change. While some methane leaks occur during the use of natural gas in steel production, the main source is coalbed methane, which is released directly into the atmosphere during the mining of metallurgical coal for blast furnaces. Methane is far more potent than CO2, trapping about 80 times more heat over the first 20 years. Approximately half of the warming observed between the preindustrial era and the 2010s was attributed to methane rather than CO2.

Coalbed methane contributes around 25% to the climate footprint of blast-furnace steel, equivalent to about one billion tons of CO2 annually. These emissions will persist as long as blast furnaces dominate the industry.

Mitigating Methane Emissions

Fortunately, preliminary calculations suggest that methane can be removed from the supply chain of coal-based blast furnaces at a relatively low cost—less than 1% of steel's market price. Given that metallurgical coal is produced by a small number of mining companies in a few countries, partnerships to measure and mitigate these emissions are feasible. Countries like Australia and China, which is responsible for over half of global metallurgical coal and steel production, could play key roles in this effort.

Collaborative Climate Initiatives

With the U.S. stepping back from climate leadership, the EU and China have been working together on key climate initiatives. Addressing coalbed methane in the steel supply chain should be a priority for both. Reducing methane emissions could cut the sector's annual emissions by the equivalent of a billion tons of CO2, at minimal cost.

Moving Toward Truly Low-Carbon Steel

Unlike arguments for gas as a "bridge" fuel, focusing on coalbed methane does not detract from the need to move away from coal and gas toward greener methods. The world must continue to push for truly low-carbon steel. Even small investments in "light green steel" can make a meaningful difference on the path to a sustainable future.