© BMWi

What exactly is “green” steel?

By 2045 at the latest, steel production in Germany is set to become climate-friendly. This will require a complete overhaul of the production process. How does this work? The focus is on “green” hydrogen and on establishing clear criteria on what is understood as “green” in this context.

This is what it’s all about: Steel producers are still some of the largest emitters of CO₂ in our industry. By 2045, they are to switch over to climate-friendly methods. This means that steel will need to be produced without fossil fuels in the future.

By 2045, the German economy is to become greenhouse-gas-neutral. In order to achieve this, climate-damaging emissions will need to be reduced by at least 65 percent by 2030, with this number rising to at least 80 percent by 2040 – always compared with values from 1990. This can best be achieved by cutting down in areas where a lot of CO₂ is generated. In Germany, this applies to the industrial sector, for example. The steel industry alone is responsible for about 30 percent of industrial emissions in Germany. It is clear that something here must be changed quickly.

Going “green”: all steel is not equal

To better understand this, “steel” yourselves for a quick detour into the world of steel-related facts. In the past, steel was produced in one of two ways. About two thirds of German steel is produced in blast furnaces using coking coal, regular coal and gas. The final third is the result of electric steel production. The steel that is now being produced with this method already generates less CO₂, as it is often based on almost 100 percent recycled/scrap metal. In order to reach the climate goals, the transition from blast furnace production to other methods is a high priority. The goal is to create so-called “green” or “climate-friendly” steel, the production of which generates far fewer and indeed “almost zero” emissions.

For this purpose, the blast furnace method is being transitioned to a hydrogen-based production method. The direct reduction plants in use require no coking coal – in contrast to blast furnaces. In these plants, the iron ore is reduced with hydrogen (forming solid sponge iron, which must then be melted for further processing). In best-case scenarios, this process uses green hydrogen, meaning hydrogen obtained using renewable energies. This is why the availability of electricity from renewable sources plays a central role - one it also plays in the decarbonisation of the energy-intensive electric steel production process.

Supporting the transition with grant funding

The BMWK is supporting the steel industry with this transformation, both those companies switching away from blast furnaces as well as manufacturers using electric arc furnaces. Important funding programmes include the IPCEI on Hydrogen programme and the carbon contracts for difference, as well as the “Federal Funding for Industry and Climate Action (BIK)” programme, which will be published shortly and is the successor of the “Decarbonisation of Industry” funding programme.

All of the largest primary steel producers active in Germany have submitted plans for large decarbonisation projects within the framework of the IPCEI on Hydrogen, and were all selected to continue with the process. These encompass Thyssenkrupp Steel (tkH2Steel project), ArcelorMittal (DRIBE2 project), Salzgitter (SALCOS project) and Stahl Holding Saar (Power4Steel project). All four decarbonisation projects have since been approved by the European Commission. Three of the projects have already received a notice of grant approval, with DRIBE2 expected to receive one shortly. What these projects have in common is the intention to transition from coal-based blast furnace production to using direct reduction plants that increasingly incorporate renewable hydrogen with electric arc furnaces and smelters, ultimately making the production of more than eleven metric tonnes of steel per year “greener”.

BMWK concept set to promote lead markets for climate-friendly basic materials

Last but not least, because steel is a globally traded material, an important future task will be the formulation of global transparent and uniform rules and definitions for when steel can be labelled as eco- or climate-friendly (“green”). Such rules are not yet in place, nor are there recognised labels or labelling methods which could be used to differentiate these new materials from conventional basic materials. Germany aims to change this via its concept "Lead markets for climate-friendly basic materials" (in German). Transparent information and definitions on both the national and international level would strengthen the competitiveness of climate-friendly basic materials and foster the emergence of corresponding lead markets in this area. The concept is initially focussed on the three largest sectors of the energy-intensive basic material industry: steel, cement and chemicals.

Labels and funding advantages for climate-friendly products

Further building on this, reliable labelling systems could be developed. Labels are an important instrument that enable consumers to differentiate climate-friendly products from conventional ones, and require little bureaucratic effort to obtain. Companies can use labels to identify and advertise products they have produced in a climate-friendly fashion.

Not least, the concept suggests that climate-friendly products receive favourable consideration in funding allocation decisions (at least until such products become the default in Germany from 2045 and in Europe from 2050). Further possible measures at the European level include requirements for the emission intensity of basic materials and products as well as quotas for climate-friendly basic materials.

The BMWK also welcomes initiatives to transform the industrial sector, such as the LESS (Low Emission Steel Standard) label recently introduced by the Association of Steel Producers at the Hannover Messe. These initiatives are an essential mechanism for creating transparency around and incentives towards climate-friendly basic materials and products in the market.

This can make “green” steel into a reliable and in-demand product used actively across the globe to prevent climate-damaging CO₂ emissions. More information about this can be found in the “Steel Action Concept”, which presents a comprehensive policy concept for a long-term, strong, internationally competitive and climate-neutral steel industry.