Getting to Greener Steel
Coalbed methane is an underappreciated problem of global steel production. While cutting methane emissions in the steel supply chain will not produce green steel overnight, it could reduce the sector’s emissions by the equivalent of a billion tons of carbon annually, and at little cost.
By Gernot Wagner and Roland Kupers
New York – Burning coal to generate power is so uneconomical that the Trump administration has resorted to issuing stay-open orders to prop up the dying industry. However, there is one area where coal is still king: in the production of primary iron to make steel.
This matters, because iron and steel production account for over 10% of annual global greenhouse-gas emissions. Most of these emissions come from blast furnaces, where coal is used to strip oxygen from iron ore, producing not only iron but carbon dioxide (the main byproduct).
Fortunately, there are better ways to do this. One is simply to avoid making new iron in the first place. Steel is 100% recyclable, and over one-fifth of the global supply by now is derived from recycled scrap. Recycling requires only electricity, so one can envision a perfect circular economy in which wind turbines produce electricity to produce steel from recycled wind turbines. This is already largely economical in places where scrap steel is readily available, such as the United States and Europe, but less so for fast-growing Asian economies.
Another option is to use natural gas. Only around 7% of steel globally is produced this way, because it does entail some additional costs and complications. Nonetheless, this option paves the way to one of the primary methods of cutting steel emissions to near-zero: replacing gas with green hydrogen.
The Swedish startup Stegra does just that. It broke ground in 2022 on the world’s first “deep green” steel plant – a major achievement and a big step in the right direction. The company’s goal of producing five million tons of low-carbon steel annually by 2030 is both ambitious and achievable under the right policy conditions. Moreover, similar other projects are imminent, heralding a future of low-carbon steel.
It will be a steep climb. Stegra’s five million tons are dwarfed by the 1.5 billion tons produced today using coal. For every new green steel plant under discussion, more than two traditional plants are also being planned. Unlike coal power plants, coal-powered blast furnaces will remain economical unless CO2 is priced appropriately. The European Union is starting to do that with its emissions-trading system, charging polluters around €80 ($94) per ton; but steel producers in China, India, and elsewhere face little to no carbon price.
Moreover, while direct or indirect carbon pricing must be part of the sector’s climate-policy portfolio, it cannot be the only measure. Another big part of the picture is methane. While this greenhouse gas does inevitably leak when natural gas is used to produce steel, the main culprit is coalbed methane, which vents directly into the air when mining for metallurgical coal to use in blast furnaces.
Methane is a far more potent greenhouse gas than CO2. Over the first 20 years, it traps about 80 times more heat than CO2. While CO2 remains the most potent greenhouse gas in the long run, around half of the rate of warming experienced from the preindustrial period to the 2010s was due to methane emissions rather than CO2.
This outsize effect makes coalbed methane an underappreciated problem of global steel production. It alone adds around 25% to blast-furnace steel’s climate footprint – or the equivalent of around one billion tons of CO2 per year. These emissions will continue for as long as blast furnaces dominate the industry.
Fortunately, while no industry-wide change will happen on its own, preliminary calculations suggest that methane could be removed from the supply chain of coal-based blast furnaces relatively cheaply, at less than 1% of steel’s market price. Moreover, metallurgical coal is produced by a limited number of mining companies in a handful of countries. That means partnerships to measure and effectively mitigate these emissions are well within reach. These could include not only countries like Australia, an early focus of the United Nations Environment Programme’s methane effort, but also China, which accounts for over half of global metallurgical coal and steel production.
With the US ceding the field on climate policy, the EU and China have been working more closely on key climate initiatives. Coalbed methane in the steel supply chain ought to be on their list of problems to tackle. Cutting methane emissions in the steel supply chain will not produce green steel overnight, but it could reduce the sector’s emissions by the equivalent of a billion tons of CO2 annually, and at little cost.
Unlike some arguments for gas as a “bridge” fuel from coal to renewables, there is little danger that a focus on coalbed methane might detract from the need to move away from coal (and gas) toward greener methods. The world must not lose sight of the importance of moving toward truly low-carbon steel. On the way there, “light green steel” is well worth the small investment.
Gernot Wagner is a climate economist at Columbia Business School. Roland Kupers, an adviser on complexity, resilience, and energy transition, is the lead architect of the United Nation’s International Methane Emissions Observatory.
