ArcelorMittal outlines demands for net-zero steelmaking in EU by 2050
26 June 2020 | Trading
Europe’s largest steelmaker, ArcelorMittal, unveiled plans on Thursday (24 June) to reach carbon neutrality in the EU by 2050, insisting however that success will depend on public support and incentives, including a carbon border tax.
The plan is meant to align the company’s goals with the European Union’s target of cutting emissions to net-zero by 2050, a commitment the bloc made under the Paris Agreement on climate change.
In the short term, the company says it is committed to Europe’s 2030 climate target by developing new ways to increase the use of low-quality scrap metal in its primary steel production process.
“ArcelorMittal Europe is doing a lot of work to develop a path to net zero,” said Aditya Mittal, the CEO of ArcelorMittal Europe and CFO of the global group.
But “we do need policy incentives” to reach the EU’s 2050 carbon neutrality goal, he told journalists during an online press briefing on Thursday, saying that will require investments worth $15-25 billion over the next 30 years.
“It needs a team effort. The support the EU and member states can give to ensure we have well-designed policy to make large scale, competitive, carbon-neutral steelmaking a reality, is critical,” Mittal said in a statement.
Carbon border tax
Among those is a ‘carbon border adjustment mechanism’ to make European steel competitive with imports from regions that do not impose similar regulations on CO2 emissions, the company said.
The European Commission’s plan for a carbon border tax is “very encouraging” and “warmly welcomed,” said Geert van Peolvoorde, CEO of ArcelorMittal Europe flat products.
He warned, however, that a poorly designed border tax could have “detrimental effects” on the viability of European domestic industries “due to potentially significant increase in CO2 costs”.
In any case, Peolvoorde said the border tax would need to be “complementary to free allocations” of CO2 pollution credits distributed to European steelmakers under the EU’s carbon market, the emissions trading scheme (ETS).
Until then, Mittal said, “there will be certain investments that we will be making as a company” in the next decade. But “we have not outlined what we will invest regardless of the policy incentives until 2030,” he said in response to a question from EURACTIV.
Projects that will go ahead regardless of additional public support include increased usage of scrap metals and some hydrogen projects, which are already benefitting from research and innovation funding at EU or national level, Mittal indicated.
Two routes to carbon neutrality
ArcelorMittal outlined two routes to carbon neutrality, one of them involving hydrogen as a replacement for natural gas as a reductant in the steelmaking process.
Peolvorde cautioned, however, that “we are many years away” from large-scale affordable renewable hydrogen for steelmaking.
For that to happen, prices of renewables-based hydrogen would need to fall significantly, from around €4 per kilogramme currently to around €1-2 per kg, said David Clark, vice president at ArcelorMittal in charge of strategy, commercial coordination and planning.
The other route involves a combination of clean electricity, greater circularity in sourcing raw materials and carbon capture and storage (CCS) technology to offset emissions.
Incentives to achieve this include state aid support and so-called “contracts of difference” to bridge the gap between the CO2 price on the carbon market and the carbon price that would be required to make the investments worthwhile.
By investing in both routes, ArcelorMittal claims it can “significantly reduce” all process emissions by 2030 “while waiting for the large-scale, affordable renewable energy needed for hydrogen-based steelmaking.”
The two routes rely on three clean sources of energy to achieve carbon neutrality:
- Renewable electricity such as wind and solar,
- Circular carbon, using biowaste materials such as forestry and agriculture residues, to produce bioenergy; and
- Carbon capture and storage (CCS) where CO2 is captured before it is emitted, and then transported and stored underground.