Steelmaking is one of the industrial processes that generates the highest amount of CO2 emissions in the EU, primarily due to its use of coking coal as a reactant and fuel. Accounting for 5.7% of the bloc’s total greenhouse gas emissions (GHG), driving down the emissions of this energy-intensive sector is a priority.

The main goal of this briefing is to address the need for a comprehensive transformation of the steel industry, to address several social and environmental crises, to avoid a worsening situation and to contribute to a restorative and regenerative approach for the EU and with the aim of supporting improvements at a global level.

Our recommendations for such a pathway feature four main headlines:

Prioritise circular steelmaking for a less resource-intensive industry

A systemic, value chain approach is necessary to limit extractive activities which remain highly energy intensive and socially and environmentally destructive. Forthcoming golden opportunities are looming in the EU to secure this vision. First, for products, with the opportunity to enshrine green requirements for steel products and other intermediate products in an ambitious EU sustainable product policy (Sustainable Product Policy Initiative/Ecodesign of Sustainable Products Regulation). Second, for processes, with more circularity aspects in environmental permits at installation level, made possible by the current Industrial Emissions Directive (IED) revision. Continuing to focus narrowly on decarbonising production processes alone, especially by using green hydrogen-reduced-iron, will miss out on achieving the full transformation of the steel industry for people and the planet as large amounts of non-endemic resources (i.e. iron ore) would still need to be extracted and processed.

● Integrate sufficiency measures into sectoral tools

EU steelmakers have announced significant investment this decade to be at the forefront of less carbon-intensive steelmaking. Lowering the emissions of the steelmaking process with green hydrogen has even more of an impetus now that an unprecedented increase in the uptake of renewables seems to be gaining momentum against the backdrop of the Russian invasion of Ukraine and heightened energy independence awareness1. However, unrealistic numbers are attached to a transformation that would rely mainly or mostly on an energy shift, as the steel industry would need four times its existing electricity consumption to replace current conventional production levels. This increase would give rise to greater environmental and social concerns, namely infrastructure issues with land consumption and competition between the use of renewables. Adopting a more holistic reflection on the actual needs for green steel, disconnected from a growth-based approach and demanding clear prioritisation in the use of renewables and green hydrogen is therefore a tipping point of the sector’s transformation.

Make polluters pay

The EU Emissions Trading System (ETS) did not trigger the expected cuts in greenhouse gas emissions of industry. A significant amount of pollution worsening the climate crisis has been released without steelworks actually paying for their pollution, as most allowances were allocated for free and the scheme has been used to secure substantial additional earnings. The current ETS revision has the opportunity to right a wrong with making polluters pay and incentivise them to reduce their greenhouse gas emissions. Combined with the revision of the IED, a global approach in pollution prevention should be put forward with the possibility for authorities to limit the amount of GHG released by steelworks at installation level, along with other pollutants, to provide a safe and healthy environment for local communities.

● Applying conditions on public funding for industrial transformation

The existence of public funding or favourable regulations should not be the prerequisite for industry’s business case, which is precisely what industry is calling for. Companies behaving responsibly towards society should also be expected to take business decisions with their funds and financing requests to pay for the sector’s transformation and move away from coal. Public support should be delivered under the condition of clear industry transformation targets, according to a new social contract comprising social and climate justice elements. In no case can public funding be used for bailing out polluters with no strings attached, which is shifting money away from the transformation with the risk to artificially extend the lifespan of polluting processes, obscuring further the future of the next generations to live in a fair way on a healthy planet.

Read and download our recommendations in full here


1 Communication of the European Commission, REPowerEU: Joint European Action for more affordable, secure and
sustainable energy, COM(2022) 108 final of 8 March 2022