The global steel sector can reach net-zero greenhouse gas emissions by the early 2040s via strategic investments in key technologies such as direct reduced iron (DRI), a coal phase-out in steel production and by establishing a green iron trade, according to new research by the think tank Agora Industry and research institute Wuppertal Institute.

The keys to the sector’s decarbonisation lie in a higher material efficiency, a big increase in scrap-based steelmaking and kick-starting hydrogen-based steelmaking. Additionally, the steel industry has the potential to generate more than 200 million tonnes of negative emissions per year by 2050 by using bioenergy with carbon capture and storage (BECCS) technology, say the authors.

The study provides two scenarios for 1.5°C-compatible steelmaking focused on different technologies: one applies a wide array of clean steelmaking technologies, and the other an accelerated roll-out of DRI after 2030. The research found that both scenarios are technically feasible if governments and industry take rapid action, including removing major technological bottlenecks such as engineering and construction capacities, ramping up key technologies and infrastructure, and putting in place a targeted regulatory framework.

Both scenarios show that a coal phase-out in steelmaking by 2043 and 2045, respectively, is technically feasible, helping to reduce both the industry’s direct CO₂ emissions and also those deriving from coal mine methane leakage.

Governments can support the steel industry’s full decarbonisation to net-zero emissions with financing instruments such as carbon contracts for difference, increased funding for innovation and carbon pricing, and further carbon leakage measures. They can also encourage the uptake of climate-friendly products by defining green steel, setting limits on embodied carbon and adopting green public procurement practices.

“Our study shows that it is time to remove the ‘hard-to-abate’ label from the steel industry," said Frank Peter, director of Agora Industry, in a press statement. "The technologies and strategies required to reach net zero are already there – now governments and companies need to combine their efforts to deploy them fast.

“If the steel sector was a country, it would be the third-largest CO₂ emitter and the second-largest coal consumer. This is why the accelerated decarbonisation of the sector is so important, and can be a key element in raising global climate ambition.”