Carbon tax necessary to make steelmakers more green, says SSAB boss

Martin Pei, head of Swedish steel giant SSAB, said that many of the attempts to claim steel is green are nothing other than branding.

“There are so many green steel initiatives and many of them are only greenwashing. They are not doing anything, they are selling certificates,” he said, speaking on the sidelines of the COP26 climate conference in Glasgow.

Pei called for transparency so that companies could not continue making the same product but brand it green.

The global metals industry is one of the largest emitters in the world and cutting carbon is notoriously difficult. According to an estimate from the World Steel Association, steel alone accounts for about 8 per cent of global carbon emissions.

To help counter this, SSAB plans to produce 1.5 million tonnes per year of “fossil-free steel” by 2026, using electricity to produce hydrogen by splitting water molecules. It would be a large chunk of the business’ current nine million tonnes.

However, Pei added that governments need to step in to help make the case for carbon reduction by setting a price on each tonne that companies emit: “[What is required] in order to make this transition possible and quick enough, which we need, is to set a price on emissions”. This would help climate mitigation efforts and create the business logic to go green.

“Ideally, this would have been better if you could do it globally, and everybody sets the same price. But that is, of course, very tough,” he told the PA news agency.

The International Monetary Fund (IMF) envisions a three-tier system which sees developed countries paying $75 (£56) per tonne of carbon, reducing to $50 (£37) and $25 (£18) in less-developed parts of the world.

Pei’s calls were echoed by Lord Barker, a former UK energy minister who now chairs Russian aluminium producer EN+. While steel and aluminium face many different issues, Lord Barker also called for an international price on carbon.

Coal-fired aluminium often emits about 16 to 18 tonnes of carbon per tonne of aluminium, he said, while electric-powered aluminium only emits about 2.5 tonnes.

The biggest challenge in cutting those last emissions is the smelting process, towards which end EN+ is trialling a method that will reduce the emissions to about 10 kilograms per tonne. As a colourful comparison, this is similar to the weight of a dachshund, compared to a world average of three elephants.

Barker made his comments whilst sitting under an aluminium sculpture in Glasgow which EN+ had created using the low-carbon method he described.

Lord Barker said that shipping and logistics are still challenges for all metal producers that want to decarbonise: “I think no single part of the supply chain – be that aluminium or steel – is capable of solving the net-zero challenge on their own”.

Given the steel sector’s accepted significant carbon impact, in October a study warned that the steel industry risks becoming a ‘carbon pariah’ without greater investment in low-carbon technologies for its production and that its climate impact could double without rapid green investment.

In August, Hybrit, another Swedish steel firm, announced that it had sold the world’s first steel that had been manufactured entirely without the use of fossil fuels.

Earlier this year, the Energy and Climate Intelligence Unit (ECIU) published a report taking a snapshot of progress in sustainable steel production, finding that while there are many sustainable steel production projects planned or under way in the EU, there were no plans for similar projects in the UK.

Further comment on the sector this year came from think tank Common Wealth, which stated that the UK government should accelerate investment in greening the steel industry in order to support the Covid-19 recovery whilst simultaneously tackling climate change.

Earlier this month, a study led by the University of Leeds posited that domestic manufacturers will struggle to adapt to the UK’s green energy transition and move away from traditionally fossil fuel-led production processes.