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Transformation of the steel industry is gaining traction

The Federal Government is providing an additional €5 billion for the swift transformation of energy-intensive industries. More specifically, this money will be used to promote the use of hydrogen in industry, a programme to decarbonise the industrial sector, and a pilot project for climate contracts.

Supplying key sectors such as the automotive and construction industries with an essential material, the steel industry is a pillar of our economy. We depend on it even for our electricity, as wind turbines are based on steel constructions. And steel is also the starting point for many other supply chains. At the same time, however, the steel industry also accounts for a large share of our carbon emissions in Germany. In 2018, the sector produced 39.7 million tonnes of crude steel, emitting approx. 58.6 million tonnes of CO₂ in the process.

In adopting The Steel Action Concept in summer 2020, Germany laid the basis for the sector’s transformation. Since then, progress has been made on implementing the key points highlighted in this paper. Between 2022 and 2024, the Federal Government will now provide something like an additional €5 billion to further speed up the process of decarbonising the industrial sector. In early May 2021, the most senior representatives of the large German steel companies, the Association of Steel Producers, and of the metalworkers’ union (IG Metall) met with Federal Minister Altmaier to discuss the progress made and the challenges remaining with regard to the implementation of the Steel Action Concept.

Referring to the recent Judgment by the Federal Constitutional Court on climate action (April 2021) and the ensuing tightening of the national climate targets, Minister Altmaier said in early May that speeding up the transition will increase the costs to be borne. He estimated the overall investment cost required to make steel production climate-neutral at €35 billion, going on to say that the public sector might provide around ten to twelve billion euros of this sum over the next thirty years.

In clarification, he said that, without such support, steel production would not have a long-term future in Germany and Europe as a whole, given the strict climate regulations. This, he explained, would result in steel imports from parts of the world with much less stringent climate rules. This, however, would be bad news for the climate and for the economy. Minister Altmaier also highlighted that the transformation of energy-intensive industries, including steel production, is something that can only work if there is close cooperation between industry, the unions, and policy-makers.

Most of the €5 billion that has been earmarked for the decarbonisation of industry will be made available through the Important Project of Common European Interest (IPCEI) on hydrogen, the 'decarbonisation of the industrial sector' (in German only) funding programme, and a project piloting 'carbon contracts for difference'.