Automakers Must Drive Global Push for “Green Steel”

By Megan Larkin 

Sweden’s Volvo Cars has seen the future of the automobile: it’s built with carbon neutral “green steel.”

That’s the message that Volvo sent last week when it announced a collaboration with Swedish steel producer SSAB to produce “the world’s first vehicles to be made of fossil-free steel.”  Volvo and SSAB are pioneering a carbon neutral steel production process that this year will produce the first “green steel” concept cars ahead of serial production “within a few years.”

Volvo isn’t alone in that vision of a near-future carbon neutral automobile steel supply chain. Scania, a Swedish truck manufacturer, is investing in H2 Steel, a hydrogen start-up, to jumpstart access to green steel in response to consumer demand. And Boston Metal, an electrolysis-based steel technology start-up has already received seed funding from BMW in a similar venture. BMW has described that investment as part of the German automaker’s aim to disrupt an “extremely pollutive industry.”

These initiatives are essential in order for automakers to meet the growing consumer demands for environmentally friendly automobiles that are driving the rapid expansion of electric vehicle development and production. But automakers increasingly recognize that reducing the carbon footprint of their products must go beyond electrification and address the use of steel in their products.

The average vehicle requires an average of around 2,000 pounds of steel, making the automobile sector a significant consumer of a material that contributes an estimated 8 percent of total annual global carbon emissions. Given its role in global carbon emissions, decarbonizing the steel industry will be integral to limit global warming to 1.5 degrees Celsius by 2050. The United Nations’ Intergovernmental Panel on Climate Change (IPCC) has warned that failure to meet this target will greatly increase “climate-related risks to health, livelihoods, food security, water supply, human security, and economic growth.”

Some of the world’s largest steel makers have already publicly announced that they will transition their production processes to carbon neutral status by 2050. Those companies include ArcelorMittal, Japan’s Nippon Steel, China’s Baowu Steel and POSCO in South Korea.  Those firms deserve credit for setting out such ambitious goals. But what they lack are clear timetable and science-based targets to allow those companies to achieve those objectives. And one of the biggest challenges for steel companies in unveiling the details of those carbon neutrality goals is cost.  Some estimates place the total cost for heavy industrial decarbonization at $11 trillion-$21 trillion through 2050. What steelmakers need, and soon, are assurances from their buyers there is a lucrative, growing market for low carbon or carbon free products that will justify the costly transition to zero emission production systems.

This is where automakers come in. Any demand that automakers make for green steel will communicate to steelmakers the longer-term financial incentives for investing in carbon neutral steel production technologies. Automakers’ massive purchasing power provided by the huge volumes of steel they buy gives them significant influence in the type of steel their suppliers produce. That means that automakers have untapped leverage that they can use to pressure steel makers to transition their current highly carbon intensive production methods to lower carbon or carbon neutral systems.

Automakers seeking to navigate their route to a carbon neutral supply chain now have the resources to coordinate with government: an international, multistakeholder policy tool dedicated to accelerating and scaling-up the decarbonization of heavy industry to align with a 1.5-degree Celsius trajectory. The Global Framework Principles for Decarbonizing Heavy Industry (“Framework Principles”), developed in partnership with The Climate Group, outline the role of government and private industry to ensure the successful decarbonization of heavy industries including steel, cement and chemicals through allocation of public financing for emissions reduction plans. The Framework Principles specify investment in low- and zero-carbon technologies as a top government and corporate priority to help phase out fossil fuel use in industrial processes.

Importantly, the Framework Principles go beyond the obvious targets – heavy industrial producers and manufacturers – and recognize the importance of end users, such as the automotive industry. Principle #3 calls for policies to create buyer demand for “low-carbon, circular, and resource efficient basic material products.” These policies would likely give muscle and leveraging power to end-user demands for green steel.

The automotive industry is waking up to growing consumer demand for environmentally friendly, carbon neutral products, particularly cars. What is needed is a sense of urgency to make the necessary changes to steel production processes in order to limit global warming to 1.5 degrees Celsius by 2050. Martin Lindqvist, President and CEO at SSAB, says there is “a new green revolution emerging.” The appetite for green steel technology is there. With stronger partnerships between automakers and green steel technology in reach, he may just be right.

Megan Larkin is an Associate at the Washington, D.C.-based environmental campaign organization Mighty Earth where she works on its heavy industry decarbonization campaign and business development.