(MENAFN- Asia Times) The recent COP27 conference has received a mixed reaction from observers. On the one hand, it was praised for its breakthrough agreement to provide“loss and damage” funding to help the countries on the front line of climate change cope with the natural disasters and biodiversity loss they are likely to suffer.
On the other hand, however, critics say that the conference failed to agree on the mechanisms for reaching net zero emissions. The final agreement signed by members does not pledge to curb the use of fossil fuels, as suggested by India and the European Union.
However, a deep dive into the 12-month action plan agreed at COP27 shows that it does contain some new ideas which many observers have overlooked.
The document includes plans to ramp up hydrogen production for cleaner energy, as well as a package of actions to increase the supply of low-carbon material for public infrastructure projects.
In total, the sectors included in the plan account for more than 50% of global greenhouse gas emissions. As well as hydrogen production, sectors such as agriculture, road transport, and power all feature.
The breakthrough agenda also sets out ambitious plans to decarbonize steel production. This is a particularly significant area, given that the steel sector is responsible for 7-9% of all fossil fuel-based carbon-dioxide emissions.
Results will be presented at COP28 in Dubai next November, where delegates hope to see a significant boost to the credibility and transparency of the green steel sector.
Standardizing steel
The thrust of the plan is to stimulate investment in green steel by developing robust definitions for low-emission and near-zero-emission steel.
A program of private and public procurement of green industrial goods is also intended to incentivize investment in green steel to bring down manufacturing costs in the long term. Dedicated Climate Investment Funds will be set up to help drive the transition in polluting industries like steel.
Still, the scale of the challenge ahead is enormous. The International Energy Agency alongside energy research consultancy Wood Mackenzie estimate that a total investment of about US$1.4 trillion will be needed to decarbonize the iron and steel sector by 2050.
Existing methods
As it stands, state and market mechanisms to mobilize capital toward innovation and development in green metallurgy have failed to move the needle. The majority of investment in such projects come either from venture capital firms or from existing industry players investigating greener ways to manufacture the gray metal.
The gradual replacement of blast furnaces with electric-arc furnaces (EAFs) is already under way in some companies. EAF-based mills produce 28% of the world's steel, but they account for only 8% of the CO2 generated by the steel industry. EAFs produce less than 1.5 tons of greenhouse gas equivalent emissions per ton of steel, compared with 2.3 tons in blast furnaces.
China, which produces more than 60% of all global emissions from steel production, is now transitioning toward EAFs. Climate-change think-tank E3G says this could help cut Chinese emissions from steel by almost 40% by 2050 relative to 2020 levels.
But whereas blast furnaces use iron ore, EAFs need a different raw material: direct reduced iron (DRI), usually in the form of hot briquetted iron (HBI), to facilitate transportation.
HBI comprises 90% iron, and has a metallization degree of more than 93% and a density exceeding 5.0 grams per cubic centimeter, which makes it well suited for the production of steel in electric-arc furnaces and converters.
Russian mining and metals company Metalloinvest, with an installed capacity of about 4.5 million metric tons of HBI per annum, controls about half of the global market of HBI supplies, according to Midrex 2021 data. The company focuses on green metallurgy and has plans to commission new HBI plants.
Zero-carbon steel
It is also theoretically possible to produce zero-carbon steel. Sweden's SSAB made history in July 2021 when it delivered the world's first zero-carbon steel – made with green hydrogen – to the Volvo Group.
The world's first carbon-free steel was made using a technology designed by SSAB along with energy company Vattenfall and iron-ore miner LKAB. SSAB claims that the technology, called HYBRIT, could reduce Sweden's total carbon emissions by at least 10%.
However, SSAB does not plan to roll out its fossil-fuel-free steel on an industrial scale until 2026, underlining the difficulty of scaling up innovative new carbon-cutting technologies.
Luxembourg-based ArcelorMittal, the world's largest steel producer, plans to build the world's first zero-carbon steel facility in Spain. The plant will run on green hydrogen and renewable energy. However, renewable-energy news site Recharge reports that the company has asked for €500 million (US$517.6 million) of public money to realize the project, highlighting the cost of such installations.
Nonetheless, policymakers hope that in the future, markets will reach a tipping point, where industrial-scale low-carbon steel is manufactured on a large enough scale that it becomes the more desirable and commercially viable choice. Regulation, including carbon pricing mechanisms and standardized emissions disclosures, should help to foster quicker uptake.
In the short term, however, it falls to manufacturers and investors to redirect resources toward this vital effort.