(MENAFN- The Conversation) Australia is currently facing twin crises: housing and climate change.

A lot more homes are needed, fast. Australia's housing crisis isn't just an affordability issue. It damages mental health over the long term.

But building more houses contributes substantially to carbon emissions.

There's one material that sits squarely at the centre of both the housing and climate crises: steel. Steelmaking is one of the world's biggest industrial emitters, responsible for 7–9% of carbon emissions globally. It's essential for housing, from single houses to larger developments and apartment towers.

There's a win-win here. Australia is well placed to make green steel from its abundant iron ore supplies. This makes it possible to cut emissions while scaling up building efforts using faster prefab and modular factory techniques making use of steel's strength and exact dimensions.

Steelmaking has long been extremely emissions intensive. Yasin Hemmati/Unsplash, CC BY-NC-ND Do standalone homes actually use steel?

Under the National Construction Code, builders can use steel frames for detached homes. Australia's National Association of Steel Framed Housing lays out extra guidance for residential steel framing.

Wall studs, ceiling rafters and bracing can all be steel. Concrete house slabs and footings also rely on steel reinforcement.

Steel roofing has become the most popular option for new Australian houses in every state and territory, according to CSIRO housing data. Most apartment buildings use steel-reinforced concrete floors and walls.

How can steelmaking go green?

Making steel is hugely energy-intensive, as it requires very high temperatures often produced by burning coal. But technology has now progressed significantly.

Green steel is made by swapping out coal-fired blast furnaces for electric arc furnaces that melt scrap and low-emissions iron using electricity. Another method makes iron, the key input to steel, using hydrogen instead of coal. This is then turned into steel in electric furnaces powered by renewable energy.

Researchers at CSIRO and the Grattan Institute point out Australia is well-placed to make green steel, given excellent renewable resources, plentiful iron ore and strong demand from trading partners such as Japan, South Korea and the European Union looking to cut supply-chain emissions.

This isn't just theory. Government efforts to keep South Australia's Whyalla steelworks going after bumpy ownership changes focus on shifting away from coal-based steelmaking. Western Australia has three green steel projects. Green steel plants are being developed in nations such as Sweden, Germany and China.

South Australia's Whyalla steelworks have had a bumpy ride, prompting a government bailout package focused on cleaner production. Isabella Ward/AAP

But green steel will only be viable if there's demand. Here, policy is catching up, giving builders incentives to buy low-carbon materials. A new federal green procurement policy already applies to large construction contracts.

The new national Guarantee of Origin scheme certifies the emissions of products such as hydrogen. Over time, it will help verify claims that green steel is, in fact, low-emission. This will be essential for green steel suppliers to win public and private contracts.

States are also moving. New South Wales is the first to tackle the carbon pollution created when making concrete and steel, known as“embodied carbon”. Since October 2023, it requires developers to measure and report these emissions to help set future standards and targets.

It's not mandatory to use low-emissions materials such as green steel, but the nudge of reporting emissions rewards suppliers who can show lower carbon steel, given many clients now prefer low-emissions materials.

Why link green steel to the housing crisis?

Australia's housing crisis is partly due to a shortage of homes. Builders and developers are finding it hard to scale up to meet demand.

Using steel can help build homes faster. Building homes in off-site factories using modular or prefab techniques speeds up build time and cuts waste. For homes like this, light-gauge steel frames are very useful, as they are strong, light and made to exact specifications.

Australia's building regulators are developing guidance to make more of these prefabrication and modular approaches align with the National Construction Code.

Globally, modular methods have shown they can deliver faster, cleaner projects when used at scale.

Faster build times help housing supply, and cleaner steel helps the climate. The two goals can reinforce each other rather than compete.

What are the challenges?

At present, early batches of green steel still cost more than conventional steel. This is because production costs are higher, ranging from slightly higher (10%) to much higher (125% in some cases) depending on technology and region, according to the International Energy Agency. This means the industry may find it hard to go mainstream until there's enough cheap renewable power and green hydrogen.

Heavy industry relies on reliable, affordable power. Europe's experience shows high electricity prices can stall green steel projects.

Recent cancellations of large South Australian hydrogen projects show the difficulty of lining up energy, finance and engineering requirements. The Whyalla rescue plan may offer a way forward as a staged transition coupled with building renewables and storage.

The higher price tag isn't locked in forever. Research from the IEA and Global Efficiency Intelligence suggest prices will begin to head towards parity as renewable power and green hydrogen get cheaper and as carbon and procurement rules penalise high-emissions steel.

What's next?

Making green steel a reality will require locking in demand to let steel mills know the market exists. Governments can preference greener materials in tenders, building on the federal procurement policy and embodied emissions reporting in NSW.

Certification is vital too. Claiming a product is green steel needs to be backed by the Guarantee of Origin scheme and other robust declarations. Closing the cost gap may require targeted finance and support measures.

Clean energy government agencies such as ARENA and the CEFC may need to back projects such as electric arc furnaces and direct reduction iron pilots, and ensure there's enough renewable power and storage.

Boosting productivity in construction will be necessary too by encouraging modern techniques such as modular and prefab houses. Construction has fallen behind on productivity, as recent Productivity Commission research shows.

Done right, green steel won't be a boutique add-on. It will be the everyday stuff used in housing slabs, frames and roofs, quietly cutting these embedded emissions.

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