The steel industry is responsible for 7% of global greenhouse gas (GHG) emissions, equivalent to the total GHG emissions of the European Union, according to ICCT (International Council on Clean Transportation) researchers. They say that reducing steel’s climate impact requires shifting from traditional coal-based steelmaking to fossil-free technologies including furnaces powered by green hydrogen and renewable energy.

Scaling up fossil-free steelmaking capacities will require significant upfront investments. Automakers can provide the investment security needed to support this shift by making commitments to purchase green steel, according to an ICCT report written by Marta Negri, Anh Bui, Ysak Ordonez, Georg Bieker, and Aaron Isenstadt.

 

Key fossil-free stats

The auto industry is the second-largest consumer of steel, procuring 12% of global steel, 17% of steel in the European Union, and 26% of steel in the U.S. Most of this is high-quality primary steel, rather than recycled steel, putting the automotive sector in an ideal position to drive transformation.

The International Energy Agency projects that the steel sector globally needs to reduce GHG emissions by 25% by 2030 to be on a pathway to reach net-zero emissions by 2050. Automakers can support this transition by committing to procuring fossil-free steel for at least 25% of all steel purchases in 2030. These commitments come at a minimal cost to automakers. Switching to 100% fossil-free steel would increase vehicle purchase prices by less than 1%.

The ICCT researchers analyzed the global supply chain networks and GHG emissions intensity of steel supplied to the 17 major automakers selling vehicles in Europe and North America. The analysis compares the automakers’ commitments to procure fossil-free steel in the future.

Among major automakers selling vehicles in Europe and North America, only four have pledged to procure any fossil-free steel by 2030. The commitments total an estimated 2% of the global steel used by all these major automakers. Including commitments to procure steel with reduced GHG emissions increases the share of cleaner steel to 4% of all automotive steel.

Figure 1 shows the major automakers’ commitments to procure cleaner steel as a share of their global steel demand. Public commitments up until 2030 are calculated as a share of total steel demand for each automaker without considering material utilization losses. The width of each section corresponds with global passenger vehicle sales.

Using conventional blast furnace-basic oxygen furnace (BF-BOF) technology in Europe results in 1.4 t of carbon dioxide equivalent (CO2e) emitted to produce the steel needed for a typical internal combustion engine passenger car. The same process in the U.S. results in 1.9 t of CO2e per typical U.S. passenger vehicle.

Producing automotive steel with a higher share of recycled content via an electric arc furnace (EAF)—and using the current average electricity mix—cuts the emissions to 0.8 t of CO2e per vehicle in Europe and 1.2 t in the U.S. This pathway will require increasing the supply of automotive-grade recycled steel to avoid diverting recycled steel from non-automotive applications.

Making cars with fossil-free steel can reduce steel-related emissions to below 0.1 t of CO2e per typical vehicle both in Europe and the U.S. Technologies to produce fossil-free steel include using renewable energy and hydrogen to process iron ore as well as using renewable electricity to recycle steel.

In Europe and North America, all automakers purchase from coal-reliant steel producers that have an average GHG emissions intensity of above 2 t of CO2e per tonne of steel

All of the steelmakers supplying automakers in Europe produce a disproportionately high share of steel using the coal-based BF-BOF process compared with the total steel market average. Therefore, the steel from these producers has a high average GHG emissions intensity of above 2 t of CO2e per tonne of steel.

Several steelmakers in North America produce a higher share of recycled steel through EAFs, resulting in a wider range in emissions intensity of between 2.1 and 1.0 t of CO2e per tonne of steel. However, automakers mostly purchase steel with a lower-than-average share of recycled steel.

Figure 2a/b shows the economic connections between automakers and steel producers in Europe and North America. The thickness of the flows is proportional to the economic value (in $) exchanged between the companies in the respective regions. The ICCT estimates are based on data from Bloomberg LP, 2023.

 

Defining more sustainable steel

With regard to more sustainable steel, many terms are used to describe better materials and processes such as fossil-free steel, green steel, and reduced-emissions-intensity steel. Futurride asked the ICCT about the differences among them and if there are any industry standards.

According to Negri, the lead author of the report, there is no accepted definition of green steel yet. However, some standards have been developed that define the “greenness” of steel based on the scrap content and the emissions intensity, for instance, from ResponsibleSteel and the German Steel Federation’s Low Emission Steel Standard (LESS). In their report, ICCT researchers provided a short description and comparison of these standards.

They also define, in their report, fossil-free steel as that produced with the green hydrogen DRI-EAF (direct reduced iron-electric arc furnace) pathway or compatible with World Economic Forum’s First Movers Coalition and/or ResponsibleSteel Level 4. Reduced-emissions-intensity steel includes other production pathways, with emissions intensity below the industry standard.

These are not accepted definitions but have been used by the ICCT researchers to clarify what we referred to when using those terms. They expect there will be convergence over definitions in the next few years.

 

Car companies at the forefront

In the report, ICCT researchers identified the automakers of the 17 analyzed that are most advanced in terms of fossil-free primary steel use and recycled steel use, according to Negri.

Concerning fossil-free primary steel use, as it is still not commercially available, they analyzed commitments for automakers, and Ford, Mercedes-Benz, GM, and Volkswagen appear to have public commitments to use fossil-free steel within 2030.

Concerning recycled steel, BMW uses 25% recycled steel and Volvo Cars uses 15%. Supporting the latter stat, Volvo reports that the proportion of recycled materials in the EX30 is the highest of any of its cars so far, with almost one-fifth of the steel being recycled material.

Renault Group has an average of 17% recycled steel in flat-steel car parts, and 90% in long-steel car parts (but no estimates on the average recycled share per vehicle). Stellantis declared it is using up to 30% recycled steel (according to their suppliers’ average). More details are provided in the report.

Some automakers may have started production of prototypes or concept vehicles with reduced-emissions steel, but researchers did not look into those for this analysis.

 

Recommendations for automakers and policymakers

The ICCT researchers say that automakers could consider the following options to reduce steel-related GHG emissions in vehicle production:

  • Demonstrate demand for fossil-free steel. Commit to fossil-free steel procurement by signing pre-purchase agreements, directly investing in companies developing fossil-free steel capacities, or by joining industry initiatives such as the Climate Group’s SteelZero or the First Movers Coalition at the maximum level of ambition with specific timelines, steel quantities, and emissions reduction goals.
  • Make vehicles easier to recycle. Increase the availability of high-quality recycled steel by optimizing vehicle design for recyclability; in particular, reduce the contamination of steel with copper and other elements during the recycling process.
  • Increase disclosure of steel emissions intensity and recycled content. Require environmental product declarations from steel producers, track and disclose emissions intensity and quantities of pre- and post-consumer scrap in the purchased steel.
  • Make vehicles lighter. Increase lightweight designs to reduce the quantity of steel in a vehicle.

Policymakers could consider the following policy options to reduce the GHG emissions of steelmaking in general and steel used in vehicle production in particular:

  • Provide subsidies to scale up fossil-free steel production. Subsidies could help to encourage further investment in clean technologies that for now entail higher costs.
  • Introduce an emissions trading system covering the steel sector. This market-driven approach can incentivize companies to reduce GHG emissions and invest in energy efficiency and decarbonization.
  • Incentivize the use of fossil-free steel in vehicle production. Some automakers have made commitments, but these are voluntary. Requiring a fossil-free steel quota or an average GHG emissions intensity threshold for steel used in new vehicles could boost demand and thereby promote investments by steel producers.
  • Require vehicles to be designed for recycling and increase the supply of automotive-quality secondary steel. Measures to increase the supply of high-quality secondary steel for automotive applications include ensuring the vehicle’s collection and end-of-life management, improving the sorting of metal parts during vehicle dismantling and shredding, and requiring a recycled steel quota in newly built vehicles.