To create a Net-Zero steel sector in the UK and meet Government targets, a new report from UK Steel calls for a renewed focus on establishing a positive policy environment for steelmaking.
Government has targeted a 95% emission reduction from steelmaking by 2050, while the Climate Change Committee has recommended that emissions from ore-based steelmaking be near zero by 2035.
New Net Zero steel production will increase electricity use, but industrial electricity prices are a key barrier, as UK steelmakers currently pay almost 60% more than their European counterparts.
However, a new report from the Environmental Audit Committee (EAC), warns that the Government’s actions to decarbonise the steel sector does not yet meet its ambition.
The EAC has published a response to the Government’s work examining green steel. It states that while the letter from the Business Secretary suggests that some positive initiatives, such as the Hydrogen Business Model and the Net Zero Hydrogen Fund, are being explored, and indicates constructive engagement with the sector, the Government has some way to go in formulating a strategy for the decarbonisation conundrum for steel.
Many of the innovations that Ministers are currently pinning their hopes on could take years before they result in any meaningful drop in emissions.
UK demand for steel is expected to grow by 2030, presenting an opportunity to reindustrialise and create green jobs.
Any route to Net Zero steelmaking must include creating a market for Net Zero steel, ensuring that imported, high-emission steel does not undermine domestic investment.
Globally, no steel sector has yet decarbonised – the UK can secure a tremendous first-mover advantage.
Commenting on the publication of UK Steel’s report ‘Net Zero Steel: A Vision for the Future of UK Steel Production’, UK Steel Director General, Gareth Stace said: “This landmark report by the steel sector, developed in collaboration with our partners in Government and the trade unions, demonstrates the scale of opportunity to seize. Delivering Net Zero in this strategic sector is a generational challenge which will need far-sighted support from Government and a positive policy environment to achieve. As we look ahead to a change in Government, it is essential that the current focus on our sector is not dropped.
“No steel sector or steel company in the world has yet successfully decarbonised. There is a first-mover opportunity for the UK to become the first steel sector which delivers on Net Zero. If we accomplish this, we will transform almost 35,000 steel jobs into green jobs. These roles already underpin communities that have made steel for a century. By moving them to green jobs, we secure the future of these local economies for the long term and support high-paying jobs in areas that have historically suffered from a lack of investment. We can ensure that Teesside, Scunthorpe, and South Wales can lead the world in Net Zero steelmaking.
“There is not one single technology to decarbonise, but a range, including electrified steelmaking, carbon capture and storage and hydrogen. We export much of our scrap steel only to reimport it, meaning there is fertile ground for electric arc steelmaking. Our location near the North Sea means we are perfectly placed to harness cost-effective carbon capture and storage steelmaking. In the future, hydrogen-based steelmaking may also become more attractive.
“The challenges for the steel sector, therefore, are our existing high industrial electricity prices. These, which strangle investment, currently sit far higher than our European competitors. If a steel company is to invest in the costly transition to Net Zero steelmaking, we must ensure that the UK’s policy environment does not disincentivise but encourages it. Additionally, while Net Zero steel is a hugely exciting opportunity and has been welcomed across the board, currently, there does not exist a market for it, with prices being set regardless of the environmental impact. The UK Government must work to establish a market for Net Zero steel, supporting the emerging products and ensuring that UK steelmakers can compete in the short as well as the long term. Finally, there is a stark choice on carbon leakage. Some argue that to bring down our emissions, we simply import our steel. Such a choice would be devastating to steelmaking communities and do nothing to bring down global carbon emissions. We cannot offshore our emissions and hope that others will do the decarbonisation. We must have a steel sector that is prosperous, decarbonised, and domestic.
“Our report sets out how we want to work with Government in a partnership to deliver a steel sector fit not just for today, but for the future. The current administration is making real, tangible progress on this. The next Prime Minister should accelerate the progress already made to deliver on its Net Zero goals, for sectors like steel. The future of the steel industry in the UK depends on it.”
The EAC’s report concludes there is no indication that an alternative is in sight to the use of coking coal in the sector, which could dramatically reduce the use of fossil fuels in steel production. These unanswered questions risk setting the UK back compared with other national steel industries where progress towards green production is accelerating, not least in light of soaring energy costs for existing technologies.
The publication of the Government’s response to the EAC’s work comes as UK Steel publishes its decarbonisation plan. The UK Steel plan states that if the world is to have any hope in halting climate change, then ways must be found to produce steel without emissions. Furthering the UK’s Net Zero steel sector is critical, given concerns that increased climate change ambitions and accompanying costs in the UK could lead to the offshoring of production and investment.
Environmental Audit Committee Chairman, Rt Hon Philip Dunne MP, said: “Decarbonising steel production will be no easy feat, as illustrated by the Government’s response to our Committee’s work. While the positive sentiments expressed here are welcome, the actions the Government is planning all have long lead times. This is particularly true for the incorporation of hydrogen in production, and there are numerous carbon-intensive processes—such as the continued need for coking coal for certain steel products—where the Government needs to work actively with the sector to pick up the pace.
“It is promising that UK Steel’s decarbonisation plan has the backing of the Government. The suggestions to further Net Zero steel are carefully considered with a clear timeframe of when various policy interventions are required. I hope this important document clears progress on the path towards green steel before the UK market is eclipsed by progress in steel decarbonisation abroad.
“This Government’s commitment to exploring these issues must be commended. I hope Ministers fully grasp this challenge and help support the UK steel industry in its quest to be a world leader in green steel: we know the UK has this potential.”
