A GREEN FUTURE FOR STEEL

The report argues that the EU steel sector faces a critical investment window as 74% of blast furnace capacity requires renewal by 2030. It advocates for a combination of carbon pricing, circular economy measures, and innovative finance tools like Carbon Contracts for Difference (CCfDs) to scale low-carbon technologies such as green hydrogen and Direct Reduced Iron (DRI). The document emphasizes that while public funds are insufficient, the green bond market and transition finance instruments can mobilize the necessary private capital, provided there are science-based standards to prevent greenwashing.

• The European Union steel sector is at a critical juncture because 74% of its blast furnace capacity needs reinvestment by 2030, creating a narrow window to avoid locking in high-emission production for decades.
• Steel production is a major emitter, accounting for approximately 22% of EU industrial CO2 emissions and 4% of total EU CO2 emissions.
• Transitioning the EU steel sector to meet 2030 climate targets requires significant but varying CAPEX depending on the technology: EUR 21bn for Direct Reduced Iron Electric Arc Furnace (DRI-EAF) with hydrogen, or EUR 31bn for Blast Furnace – Basic Oxygen Furnace (BF-BOF) with carbon capture and storage (CCS).
• Increasing the use of steel scrap and improving circular economy practices can rapidly reduce emissions, as Electric Arc Furnace (EAF) production has a lower carbon intensity (0.7 tCO2/t steel) compared to the BF-BOF process (2.3 tCO2/t steel).
• The proposed Carbon Border Adjustment Mechanism (CBAM) is intended to replace free emission allowances under the EU Emissions Trading System (ETS) to prevent carbon leakage while incentivizing green investment.
• Carbon Contracts for Difference (CCfDs) are recommended as a tool to provide long-term price stability and reduce investment risk for breakthrough technologies by subsidizing the gap between market carbon prices and the price needed for profitability.
• Green Public Procurement (GPP) is identified as a powerful lever to drive demand for decarbonized steel, though current EU criteria remain voluntary.
• There is a substantial funding gap for the steel transition; while the EU has various funds, the estimated EUR 2bn in grants available for 2021-2030 is far below the required investment of EUR 50-60bn for new technology deployment.
• Transition finance instruments, such as Sustainability Linked Bonds (SLBs) and transition bonds, offer opportunities to link net-zero targets to capital, but they require science-based standards to avoid greenwashing.

APA

Passaro, F. (2022). A GREEN FUTURE FOR STEEL. Climate Bonds Initiative. https://www.climatebonds.net/files/documents/publications/A-Green-Future-for-Steel.pdf

Chicago

Passaro, Fabio. A GREEN FUTURE FOR STEEL. Climate Bonds Initiative, 2022. https://www.climatebonds.net/files/documents/publications/A-Green-Future-for-Steel.pdf.

Wikipedia

{{cite report |last1=Passaro |first1=Fabio |title=A GREEN FUTURE FOR STEEL |publisher=Climate Bonds Initiative |date=August 2022 |url=https://www.climatebonds.net/files/documents/publications/A-Green-Future-for-Steel.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{passaro2022green, author = {Passaro, Fabio}, title = {{A GREEN FUTURE FOR STEEL}}, institution = {Climate Bonds Initiative}, year = {2022}, month = aug, url = {https://www.climatebonds.net/files/documents/publications/A-Green-Future-for-Steel.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }