Toolkit for procuring low-emission steel

 

The climate impacts of steel production are significant

Steel production accounts for 7–8% of global greenhouse gas emissions and 11% of carbon dioxide emissions. It is one of the most significant individual industrial sources of emissions worldwide.

Limiting global warming to 1.5°C will not be possible without substantial emissions reductions in the steel sector. At the same time, steel is an essential material in the energy transition, infrastructure and the green transition. Demand is therefore not decreasing – it must become lower-emission.

Conventional steelmaking generates high levels of emissions. In the blast furnace–basic oxygen furnace process (BF–BOF), producing one tonne of crude steel results in more than two tonnes of CO₂-equivalent emissions. Achieving the goals of the Paris Agreement requires emissions from steelmaking to fall to around 0.11 tonnes of carbon dioxide per tonne of crude steel by 2050.

This shift requires major investment, technological solutions and long-term commitment. Steel production facilities are long-lived, and the investment decisions made now will determine emissions levels for decades. The technology already exists, and demand drives investment.

Technology for low-emission steel is already available

Steel is currently produced mainly using two methods:

  • blast furnace–basic oxygen furnace (BF–BOF)
  • electric arc furnace (EAF), using recycled steel

A third technology, hydrogen-based direct reduced iron (H₂ DRI–EAF), has also entered the market and enables near zero-emission production.

In the hydrogen-based DRI process, hydrogen is used as the reducing agent instead of carbon. When production runs on renewable energy and green hydrogen, emissions can be reduced by as much as 97% compared with the traditional BF–BOF process.

Green hydrogen is produced through electrolysis using renewable electricity, making the process free from carbon dioxide emissions. Unlike grey or blue hydrogen, whose production relies on non-renewable electricity, green hydrogen is not dependent on fossil fuels.

The use of recycled steel in electric arc furnaces powered by electricity also significantly reduces emissions, especially when the electricity is generated from renewable sources. However, the decarbonisation of the steel sector particularly requires low-emission primary production, that is, steelmaking from iron ore, as recycled steel alone will not be sufficient to meet global steel demand for at least the next 70 years. This means that demand for low-emission primary steel, in particular, is driving the much-needed technological transition towards cleaner steel production.

Businesses have a major role in the market for low-emission steel

Businesses can influence the climate impacts of steel over two time horizons. In the short term, the focus is on identifying and making use of the alternatives already available. In the long term, the decisive factor is what kind of demand signals are sent to the market to support future investment decisions.

In the short term, lower-emission alternatives to average steel products are already available for many steel grades. Using these options can significantly reduce value chain emissions compared with the market average.

In the long term, the role of businesses is particularly important in strengthening demand for near zero-emission steel. These production facilities are currently being built, and investment decisions depend heavily on how credible future demand is seen to be.

What is meant by low-emission steel?

There are several international definitions of low-emission steel. Different standards, initiatives and policy frameworks define emissions levels in slightly different ways.

In addition, several steel producers have developed their own product brands to distinguish products with a lower-than-average carbon footprint. It is important to distinguish between third-party verified standards and companies’ own brands.

In this context, low-emission steel includes:

  • near zero-emission steel, in line with a 1.5°C pathway
  • low-emission steel, with clearly lower emissions than the current average, for example 30% lower

For the steel industry to align with the 1.5°C target, procurement should primarily prioritise near zero-emission steel.

  • Standards and protocols

    Standards developed for the needs of steel producers:

    ResponsibleSteel
    A global certification framework that assesses environmental, social and governance criteria across the steel supply chain. It defines four levels for how low-emission steel production is.

    WRI’s GHG Protocol for Steel
    An international accounting framework that provides guidance on how emissions in the steel sector (Scopes 1–3) are measured and how emissions are related to the volume of steel produced.

    World Steel Association’s protocols
    Guidance for allocating emissions reductions to products through a chain-of-custody approach. This means supply chain traceability and the reliable allocation of emissions benefits to products.

    ISO 14404 series
    A standard for calculating plant-level CO₂ emissions and emissions intensity.

    LESS
    A German standard that already covers a significant share of EU steel production. It is based on a similar approach to ResponsibleSteel: the required emissions levels depend on the share of scrap in the production inputs.

  • Initiatives to accelerate demand for low-emission steel

    Numerous voluntary initiatives and tools have been created to accelerate demand for steel:

    First Movers Coalition
    A global public–private initiative that creates demand for low-emission materials through procurement commitments from major buyers. Its aim is to accelerate the industrial transition towards near zero-emission production.

    RMI Center for Climate-Aligned Finance – Sustainable Steel Principles
    A set of finance-sector principles that help banks and investors assess the credibility of steel companies’ climate action and direct capital towards steel production aligned with a 1.5°C pathway.

    SteelZero initiative
    A voluntary corporate commitment programme in which members pledge to increase their use of low-emission and near zero-emission steel in procurement, thereby strengthening market demand.

    Science Based Targets initiative (SBTi)
    An international framework that validates companies’ climate targets as science-based and supports the setting of emissions reductions in line with a 1.5°C pathway, including steel-related Scope 3 emissions.

    According to several international initiatives, steel is considered near zero-emission when its emissions are between 0.05 and 0.4 tCO₂e per tonne of steel. The threshold varies depending on the share of scrap used.

    Steel producers’ own product brands

    No clear frontrunner has emerged in the competition between international standards. From a procurement perspective, the situation has been made even more complex by a strong trend in recent years: more and more steel producers have launched their own low-emission steel product brands. These brands are offered to companies requesting lower-emission steel in tenders. The claims made under different company brands are not necessarily based on third-party verification.

  • Wholesalers and subcontractors

    Steel supply chains are often multi-tiered. Manufacturing companies typically work with wholesalers and subcontractors rather than directly with crude steel producers. However, this does not prevent emissions data from being made available across the value chain or demand signals from being transmitted through it.

    In many parts of the steel sector, supply chain transparency is already well advanced. Codes of conduct, product-specific data and traceability practices make it possible, when requested, to determine in which plant and by which production method a specific batch of steel was produced. Companies should make use of this information and maintain an active dialogue with their suppliers.

Why now?

The steel industry is in the middle of an investment cycle. By 2030, 71% of the world’s blast furnaces will reach the end of their technical lifespan. The decisions made now will determine the emissions intensity of production for the next 15–20 years. That is why financing and technology decisions for production facilities depend largely on expectations of future demand.

If demand for low-emission steel is not strong enough, investment may be redirected towards high-emission technologies. This would put climate targets, industrial competitiveness and supply chain predictability at risk.

Companies’ procurement decisions, commitments and public statements can serve as strong demand signals. Strong demand guides investment. Companies’ procurement decisions can:

  • accelerate the uptake of low-emission technologies
  • lower costs through economies of scale
  • help secure the future availability of high-quality, low-emission steel

Join us in accelerating demand for low-emission steel!