The steel sector suffers losses rising carbon prices climate regulation

World's largest steel companies do not reduce emissions to the rate needed to keep global warming below 2 degrees Celsius, a failure that puts an average of 14 percent of the potential value of companies at risk, according to a new badysis of profiles business results.

The 20 companies, which together account for 30% of global steel production, are currently expected to reduce their emissions by less than 50% by 2050, lagging the 65% reduction standard set by the International Energy Agency.

"Steel represents the sector that emits the most emissions – it's a huge footprint," said Luke Fletcher, senior badyst at CDP, the international non-profit organization that wrote the new report and works with companies to reveal the financial risks of climate change.

The report illustrates the inability of polluting companies to comply with climate regulation and the financial losses they could incur if the price of carbon rises and the planet warms up.

For decades, the steel industry has produced metal essential for construction, cars and cans. However, it is also responsible for 7% to 9% of all direct fossil fuel emissions, according to the World Steel Association, and is currently the largest industrial source of climate-related pollution.

According to a scenario of 2 degrees Celsius where global carbon prices would rise to $ 100 per metric ton by 2040, firms are on average subject to a 14% risk of injury, ranging from 2.5 30% for individual companies, says the report.

World Bank and International Monetary Fund leaders have pushed governments to apply higher carbon prices in order to force polluters from fossil fuels to pay for carbon dioxide that they are throwing out in the world. ;atmosphere. Reducing emissions is not enough, they say, to fight climate change effectively.

The EU's carbon price, for example, has more than tripled since 2018 and is expected to increase in the coming years. ArcelorMittal, a Luxembourg-based steel multinational, spoke of rising carbon prices in its decision to cut production in May.

Iron and steel companies are not on track to reduce emissions and avoid financial losses from rising carbon prices. According to the report, while 60% of companies have set emission reduction targets, only two of them are aligned with an emission reduction target of 2 degrees Celsius or less.

This is SSAB, a steel company established in the Nordic and American countries, which aims to achieve carbon neutrality by 2045, and Hyundai Steel in South Korea, which aims to reduce emissions by 80% 2050.

"The pace at which the steel sector reduces emissions is too slow for the transition to a low-carbon economy," said Fletcher, "and it is necessary to deploy and commercialize radical technologies to avoid carbon costs and stay competitive. "

There is also a geographical gap between the best and the worst performers. The report shows that Chinese, Russian and US companies are behind European and Asian companies in the development of low-carbon technologies.

"Many of these regions do not have strict regulations on carbon pricing," Fletcher said.

"Overall, we found that successful companies set ambitions and targets for reducing their emissions, turned to the long term, and favored innovation."

Some mills are working on steel-making technology that would reduce carbon dioxide emissions and energy consumption, such as hydrogen steel fabrication and clean electricity electrolysis.

SSAB, for example, is developing technologies for manufacturing steel with environmentally friendly hydrogen. ArcelorMittal is working on a technology using electricity to reduce iron oxides, as well as a technology to separate carbon dioxide from waste gases.

However, an innovative technology could not be implemented commercially until the 2030s and would increase the cost of steel production by 20% to 30%. Higher production costs could deter companies from adopting new technologies, Fletcher said.

Nevertheless, new technologies to reduce carbon emissions are emerging and the sector has also become a leader in recycling, with steel now being the most recycled material in the world.

"Companies are aware of the risks of these carbon costs and can reduce them by adopting cleaner technology and examining their revenue profiles," said Fletcher.