The green transformation of the iron-and steel industry requires a mix of policy instruments

No single actor can single handedly accomplish the transformation to zero-carbon steel production, this since a new steel-to-vehicle value chain needs to be formed. In the project “The emergence of new zero-carbon value chains from ore to vehicles – policy instruments that facilitates the transition”, various stakeholders have been interviewed. The focus has been on how these actors view the challenges and the needs to realize the ongoing green transition of the iron- and steel industry in Sweden.

– The green transition puts pressure on both incumbent and new industrial actors, as well as on energy companies, electricity transmission operators, public agencies and other actors. These actors all envisage various challenges, and therefore, different needs in the transition process. For the transition to succeed, a mix of policy instruments is needed, combined with long-term goals and visions, says Anna Krook-Riekkola, Associate Professor in Energy Engineering at Luleå University of Technology and leader of the project that has been a collaboration with IVL Swedish Environmental Research Institute and Chalmers University of Technology.

Radical technology shifts are favorable

The final report from the project shows that the prospects for achieving radical technology shifts in the Swedish iron- and steel production are favorable. This is significant from a carbon dioxide mitigation perspective since globally this sector accounts for around seven percent of total emissions of carbon dioxide. Both Sweden and the European Union (EU) have ambitious climate policy targets, and the planned strengthening of the EU emissions trading schemes (EU ETS) with higher carbon prices will increase the incentives to invest in zero-carbon solutions.

To address concerns about competitiveness in relation to countries that have not (yet) introduced carbon pricing of any form, the EU has decided on the so-called Carbon Border Adjustment Mechanism (CBAM). Both CBAM and the more ambitious EU ETS form part of the Union’s Fit for 55 climate policy package, which was launched in 2021 with the aim to achieve a 55 percent reduction in the net emissions of greenhouse gases by the year 2030 (compared to 1990). Several of the actors interviewed in the project stress the importance of Fit for 55. It is important that this is implemented as planned and is not weakened or entirely removed in future oversights.

Key policy instruments need to be reformed

Several key policy instruments are already in place but need to be reformed in various ways. This involves, for instance, more predictable permitting processes, the need for green public procurement, and risk-sharing with respect to the municipalities’ investments in housing and public service. Procurement requirements are deemed to be important to secure a future market for the fossil-free steel products. Today, however, there is a lack of transparency and uniformity when it comes to quantifying the climate impacts of steel. In this case, there is therefore a need to establish clear definitions and system boundaries internationally.

– The various actors point out that extended and unpredictable permitting processes are kay obstacles in the green transition. The main problem here, the researchers contend, is not a lack of holistic approaches, but rather to find ways of improving the ways in which the existing legislation is implemented in a predictable manner. The responsible regulatory authorities need competence and adequate resources, and cooperation and dialogue between different authorities as well as between the authorities and industry are keys, says Patrik Söderholm, Luleå University of Technology.

– We also provide examples of areas where new policy instruments are needed. This includes, for instance, the need for benefit-sharing mechanisms at the local level in association with the establishment of new electricity generation, says Anna Krook Riekkola, Luleå University of Technology.

The project is financed by Vinnova.

Reserachers behind the report: Johan Rootzén, Patrik Söderholm, Lars Zetterberg, Anna Krook-Riekkola, Kersti Karltorp och Filip Johnsson.

The full report External link.

The report will be launched at a webinar on October 8, 10-12 am. Find out more and sign up here: https://www.ivl.se/evenemang/framvaxten-av-nya-fossilfria-vardekedjor-fran-malm-till-fordon.html External link.