Faster and more predictable permitting processes, climate requirements in procurement, and national risk-sharing related to municipal investments in housing and community services are some of the measures highlighted as crucial for accelerating the transition to fossil-free steel, according to a new research report.
“There is no single actor or policy instrument that alone can drive the green transition; a palette of measures is needed. Several policy instruments are already in place but need to be sharpened and complemented to steer more effectively,” says Johan Rootzén at IVL Swedish Environmental Research Institute, who, together with researchers from Luleå University of Technology and Chalmers, examined the obstacles and opportunities for transforming the iron and steel industry.
Currently, the iron and steel industry accounts for about seven percent of global carbon dioxide emissions. The report shows that there are good conditions for realizing technological shifts in iron and steel production, which can significantly reduce carbon dioxide emissions. European climate legislation points in a clear direction, and the upcoming increases in ambition within the EU’s emissions trading system, including the border adjustment mechanism CBAM, create stronger incentives for transition.
Tightening the trading system will make it more profitable for industries in Sweden and the rest of Europe to transition, and the border adjustment mechanism will make it more expensive to import emission-intensive goods from countries outside the EU.
“Several of the interviewees – both industry representatives and authorities – emphasize the importance of fully implementing the Fit for 55 climate package and the ambition increases negotiated within the EU ETS, without weakening them in future reviews,” says Lars Zetterberg at IVL Swedish Environmental Research Institute.
Prolonged and unpredictable permitting processes are highlighted as one of the main obstacles to the green transition. The problem with environmental assessment lies not in a lack of a holistic view but in the need for a more predictable and long-term application of the legislation.
Procurement requirements are also highlighted as important for securing a future market for fossil-free steel. Currently, there is a lack of clarity and uniformity in how the climate impact of steel is quantified. Coordination efforts are needed both nationally and internationally to ensure uniformity in definitions and system boundaries.
“The state has an important coordinating role and must help ensure that the necessary energy and logistics infrastructure is in place in time,” says Johan Rootzén.
The report provides examples of areas where new forms of political governance and policy instruments need to be put in place. This could involve the need for local value-sharing in connection with the establishment of new electricity production and national risk-sharing related to municipal investments in housing and community services.
“Historical experience shows that it is difficult to identify and implement a successful green industrial policy. All large-scale investments are risky, and it is inevitable that some projects will fail while others succeed. But to realize the investments in fossil-free technology announced in the iron and steel industry, active state involvement is required,” says Johan Rootzén.
Text and image: IVL Swedish Environmental Research Institute
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