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$278 billion needed to decarbonize the steel industry globally

According to BNEF's "Decarbonizing Steel: A Net-Zero Pathway" report, decarbonizing the steel industry globally will require investing in hydrogen and recycling 

Globally, steel is responsible for 7% of manmade total greenhouse gas emissions and is one of the world’s most polluting industries.

Governments and companies are embarking on economic plans to decarbonize the industrial processes by which iron, steel and other metals are obtained. The European Union, Korea, Japan and especially China, where more than half of the world's steel production takes place, are working to reduce greenhouse gas emissions from these activities.

According to BloombergNEF, by focusing on hydrogen and recycling, the global steel industry could get to net-zero emissions by 2050 with an investment of $278 billion. BNEF's report "Decarbonizing Steel: A Net-Zero Pathway" outlines the path to achieving this goal, arguing that a combination of falling hydrogen costs, cheap clean power and increased recycling could play a key role in decarbonizing steel production.

Following this path, 31% of the market might be covered by steel produced with hydrogen-based clean energy by 2050; another 45% could come from recycled material and the rest from a combination of CCS systems and innovative processes using electricity to refine iron and steel.

The problem is that today 70% of steel is made using fossil fuels, and producing zero-emission steel would require stopping the construction of new coal-fired plants while favouring natural gas-fired plants, which in future years could be converted to hydrogen.

BNEF suggests five key actions to decarbonise the steel industry:

- boost the amount of steel that is recycled (particularly in China);

- procure clean energy for electric furnaces;

- design all new capacity to be hydrogen or carbon capture-ready;

- begin blending hydrogen in existing coal- and gas-based plants to lower the cost of green hydrogen, and

- retrofit (or close) coal-fired plants by 2050.

Kobad Bhavnagri, head of industrial decarbonisation at BNEF said, "Green hydrogen is both the cheapest and most practical way to make green steel, once recycling levels are ramped up. This transition will cause both great disruption and great opportunity."

In order to achieve a net-zero global steel industry, the demand for clean energy will be very high, and the role and support of policymakers will be extremely important.  While it will take a great deal of effort and investment to decarbonise steel, BNEF estimates that as much as $172 trillion will be needed to reduce emissions from global energy industry to net zero. Perhaps $278 billion is not so much. 

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