Cite report
IEA, IRENA & UN Climate Change High-Level Champions (2023), Breakthrough Agenda Report 2023, IEA, Paris /reports/breakthrough-agenda-report-2023, Licence: CC BY 4.0
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State of transition
The steel sector is not on track to meet net zero by mid-century, with total emissions still rising and less than 1 Mt of near-zero emission steel currently being produced. A significant number of new high-emission blast furnaces are anticipated, with nearly 90 Mt either planned or underway before 2025. However, announcements for new near-zero emission steel projects are also increasing, more than doubling since last year.
- Total CO2 emissions from the steel sector have risen since 2015, before stabilising since 2019.
- Direct CO2 emissions intensity has been broadly flat since 2015.
- Both need to fall by around 25% by 2030, or 3% each year, to get on track for net zero by mid-century.
- The blast furnace-basic oxygen furnace (BF-BOF) route currently makes up 70% of global steel production, with an average cost of USD 490/t between 2015 and 2020.
- Hydrogen direct reduced iron (H2 DRI) is preferred by steelmakers in some regions as a low-emission alternative.
- Cost estimates for 100% hydrogen blend are around USD 650/t for the first commercial-scale plants in 2025; 25% more expensive than BF-BOF.
- The project pipeline for primary near-zero emission projects has increased to 13 Mt, from 5 Mt last year.
- For primary near-zero emission capable plants, this has increased slightly to 58 Mt.
- Latest analysis suggests that over 100 Mt of near-zero emission ironmaking production is required by 2030, representing a gap of nearly 50 Mt, assuming all capable projects move to near-zero emissions in the near future.
Progress summary
| Area | What progress has been made? | What more needs to be done? | 2023 |
|---|---|---|---|
S1. Standards and definitions |
Increase in membership of and co-ordination between key public and private sector initiatives. Emerging consensus on emissions accounting methodologies. Growing convergence on definitions for ‘near-zero emission steel’. |
Achieve broad consensus on methodologies by end 2024. Agree process for verifying ‘near-zero emission’ claims. Accelerate adoption of standards in national policy through collaboration between countries. |
|
S2. Demand creation |
Increase in membership of key public and private sector initiatives, with CEM IDDI growing from countries representing 9% to 20% of global steel production. Increased efforts to engage regions outside Europe and North America. |
Move from commitments and pledges to contracts and policies. Agree to share procurement data to strengthen demand signal. |
|
S3. Research and innovation |
Growing number of successful private sector collaboration models for steel. Initial bilateral country partnerships being established under Mission Innovation NZIM. |
Scale up country-level collaboration, making best use of private sector models where possible. Work closely with climate finance funds to build engagement with developing countries. |
|
S4. Trade conditions |
Some initial progress within new and existing forums and agreements, such as the WTO, OECD, Climate Club and GASSA. |
Establish a dialogue on steel decarbonisation policies and trade, involving all major steel producing and consuming countries. |
|
S5. Finance and investment |
Launch of new funds, such as CIF Industry (USD 80 million out of USD 500 million capitalised). Initial interest to improve the effectiveness of delivery, including from LeadIT and the Climate Club. |
Establish a matchmaking platform to link supply and demand for assistance and build sectoral expertise among major IFIs. Donor countries to further increase commitments for industry decarbonisation funds. |
Steel recommendations
- Governments and companies should work through existing collaborative forums to align emissions accounting methodologies for steel by the end of 2024. Countries representing the majority of global steel production should commit to adopting net zero compatible mandatory standards from the mid-2020s. Appropriate steps should be taken to clarify the compatibility of emerging definitions with net zero.
- Governments and companies should increase the scale of near-zero emission steel procurement commitments to cover a significant share of their future steel demand, joining relevant public and private sector initiatives where these commitments are aggregated. These commitments should be high quality and should be supported by appropriate legal and implementation frameworks, such as advance purchase commitments.
- Governments and companies should collaborate via existing initiatives to fast-track sharing of technology learning, business case development and policy support to accelerate the development of pilot projects. Emerging markets and developing countries’ participation in key RD&D initiatives should be increased in support of this aim.
- Governments should urgently launch a strategic dialogue on trade and the steel sector’s transition, including the leading producer and consumer countries, with the purpose of agreeing ways to ensure near-zero emission steel can compete in international markets. This is needed to ensure that trade helps to accelerate the transition and does not hold it back.
- Countries should establish an improved matchmaking function focused on industry decarbonisation and including steel that can better respond to developing country requests for financial and technical assistance. This should include donor countries, recipient countries, IFIs, national development banks, philanthropic organisations, private financial institutions and companies, with regular meeting of ministers.