Mobilising Buyers to Accelerate Demand for Net Zero Steel
Mobilising buyers to bring net-zero steel to market before 2030 demonstrates that demand signals from steel buyers to steel manufacturers can unlock investment decisions and bring forward the breakthrough technologies necessary for bringing net-zero primary steel to market. The report was developed in close collaboration with industry leaders by the Energy Transitions Commission and Material Economics on behalf of the Mission Possible Partnership’s Net-Zero Steel Initiative and with the support of Breakthrough Energy. It provides guidance for critical stakeholders in major steel consuming sectors on how to actively participate in the commercialisation of low-CO2 primary steel production technologies and seize the associated commercial opportunity in being leaders in supply chain decarbonisation. As the need to deliver deep emissions reductions becomes an increasing priority for steel producers and steel users, finding solutions to reduce their CO2 emissions in the short term and prepare for deeper cuts in the 2030s and 2040s is vital. Producing steel from iron-ore via low-CO2 (and eventually carbon-free) processes will be essential to reach voluntary and regulatory climate targets by 2030 and beyond. The challenge for the whole industry is to commercialise those technologies in the next decade and rapidly bring their cost down.
Direct offtake agreements and future purchase commitments are critical to provide the confidence needed to unlock the flow of investment in low-CO2 steel production assets. For first movers, it can be a commercial opportunity. Steel buyers will be able to secure access to a scarce high-value commodity, benefit from green marketing through higher price points or growing market shares, and pre-empt regulatory changes thereby avoiding potentially costly disruptions in supply chains later on. However, as the technologies are not yet available and remain higher cost than the high carbon alternative, immediate action is needed.
The report Steeling Demand makes a number of recommendations to stimulate the early market for low-CO2 steel. Specifically:
Steel Buyers and Users:
For large, direct steel buyers: Engage in bilateral value-chain cooperation initiatives, using the demand to unlock upstream investments and accelerating the transition to net-zero.
For steel consumers not engaged in direct bilateral negotiations: Engage in the buyers’ club initiatives that will be set up for low-CO2 steel (e.g., SteelZero), and commit to as large volumes as possible.
Engage with high volume customers to develop the necessary value-chain collaboration and develop a better understanding of what needs to happen from the demand side to bring investments forward.
Unlock investment in breakthrough technologies by supporting projects with high emissions reductions potential.
Policy makers and public organisations:
Continue to provide a supportive R&D environment to foster innovation in the steel sector.
Use public procurement to create early markets for low-CO2 steel between 2025 and 2030. Use COP26 to announce a “green steel procurement” campaign with commitments from nations across the world.
Decrease the risk for first-mover bilateral agreements on low-CO2 steel by providing CAPEX support that would correspond to the public innovation value of bringing these technologies to commercialisation. 2) Decreasing the OPEX risk in taking a forward position by introducing Carbon Contracts for Difference.
Set lifecycle emissions standards for key sectors, such as automotive, construction and white goods, which could be act as an important instrument to fast-track deployment of low-carbon materials.
Educate consumers about the benefits of low-CO2 steel to encourage them to opt for products containing low-C02 steel. This would send a clear signal to the sector and increase the investment rationale for breakthrough technologies.
Mission Possible Partnership
Led by the ETC, RMI, the We Mean Business Coalition, and the World Economic Forum, the Mission Possible Partnership is an alliance of climate leaders focused on supercharging the decarbonization of seven global industries representing 30% of emissions – aluminium, concrete, chemicals, steel, aviation, shipping, and trucking.
The Net-Zero Steel Initiative, an initiative supported by the Mission Possible Partnership, aims to mobilise steel industry leaders who want to work together to shape the favourable policy, market and finance environment required to transition to zero carbon emissions in steel. The focus is on presenting an ambitious, unified front when engaging policymakers and stimulating demand for low CO2 – steel products.
ETC is a global coalition of leaders from across the energy landscape committed to achieving net- zero emissions by mid-century, in line with the Paris climate objective of limiting global warming to well below 2 degree Celsius and ideally to 1.5 degree Celsius.
Material Economics is a management consultancy firm advising leading businesses on how to reduce their environmental footprints and become more circular. The firm has published leading reports on climate change, heavy materials, and the circular economy, and has experience from more than 100 sustainability related strategy projects in sectors such as heavy industry, buildings, finance, transportation, manufacturing, and food.
Founded by Bill Gates, Breakthrough Energy is dedicated to helping humanity avoid a climate disaster. Through investment vehicles, philanthropic programs, policy advocacy, and other activities, we’re committed to scaling the technologies we need to reach net-zero emissions by 2050.