Steel is one of the most used materials on the planet, in everything from wind turbines to baked bean cans. However, it is also extremely carbon-intensive, producing 8% of global emissions. This has created a race to establish low-emissions steel supply, with industry and governments across the world investing billions in producing hydrogen direct reduced iron (H-DRI), which can be made into primary steel in an electric arc furnace (EAF) – cutting up to 85% of the emissions of traditional steelmaking.
The UK, however, plans to eliminate iron and primary steelmaking, moving to 100% secondary steelmaking in its EAFs, using recycled scrap as the primary feedstock. This is a unique plan among industrialised nations, will cut thousands of jobs, and could leave sectors like transport and clean energy dependent on imports of primary steel.
But it doesn’t have to be this way. Analysis from E3G finds that with public investment of around £2.1–3.5 billion, the next government could establish a thriving clean steel sector. This would be enough to convert the steel plants at Port Talbot and Scunthorpe to low-carbon primary steel facilities, securing jobs in these communities for the long term, and could also support investment in entirely new facilities in other parts of the country. But investment alone is not enough: the next government needs to stimulate early private investment by improving the business case for clean steel in the UK. This requires a clear green industrial strategy and policies to increase demand for low-emissions steel and bring down the cost of clean power.
The next government must take ambitious steps early on. Each year, new clean steel projects reach a final investment decision in other countries. The UK is falling behind and risks becoming dependent on those seizing the opportunity early on. By acting on the measures set out in this report, the next government will secure existing production and could attract new steelmakers ashore, seizing the opportunity of the growing market for clean steel.
Key policy recommendations from the report:
- Implement an ambitious industrial strategy that includes an explicit vision for the future of domestic steel production and how it will align with wider strategic and economic aims (from energy security to growing cleantech).
- Establish a £2.1bn–£3.5bn clean steel fund, with the aim to establish up to 3.78 Mt of additional secondary steel capacity, 4.44 Mt of low-emissions primary steel capacity, and 5 Mt of domestic hydrogen-DRI capacity.
- Establish strict conditions on labour standards and corporate responsibility in return for government funding for clean steel.
- Pursue international trade partnerships to kick-start green iron trade.
- Implement green public procurement criteria that limit the embodied carbon of steel procured for public projects.
- Increase network charge exemptions provided by the British Industry Supercharger to 90%.
- Phase out free emissions allowances in the emissions trading scheme as a carbon border adjustment mechanism is implemented.
Timeline for growing clean steel in the UK:
