Macroeconomic implications of switching to process-emission-free iron and steel production in Europe

Narratives of Low-Carbon Transitions

“…Hence the electrification of this single industry is perceived by stakeholders to necessitate a massive expansion of the domestic electricity generation system. In Mayer, Bachner, and Steininger (2019) and Bachner et al (2018a;2018b) we emphasise that this 'additionality' in terms of increased domestic electricity generation can be questioned because the implementation of hydrogen-based iron and steel technologies triggers relative price and thus foreign trade effects which lead to lower 'additional' domestic electricity supply and demand than anticipated bottom-up. Likewise, mitigation efforts are endangered if electricity demand is provided carbon intensively, which would merely lead to a shift of emissions from the steel industry to the energy supply sector.…”

“…Fischedick et al, 2014) and thus salient aspects like system-wide effects and repercussions are disregarded. A quantitative assessment of the macroeconomic effects of iron and steel decarbonisation is presented in Mayer, Bachner, and Steininger (2019). This chapter aims to make an important qualitative contribution to this discussion by revealing risks perceived and stated by different stakeholder groups, which might emerge when it comes to the implementation of 'climate neutral' steel production technologies, taking into account the interrelated transition of the energy supply sector.…”

“…The iron and steel sector also stands out because of the high risks associated with a low-carbon transition due to its exposure to geo-political developments, its dependence on global (feedstock) markets (especially for coal and gas, iron ores and scrap), the extraordinarily long economic lifetime of investments, and prevailing overcapacity issues. For the steel industry there is little scope for significantly reducing carbon emissions while continuing with the current production method (Mayer, Bachner, and Steininger, 2019). The sector therefore faces several options: either its replacement with new business activities based on alternative materials such as wood or polymers (demand-side measures); a switch to hydrogen-based steel production (as fuel, feedstock or in electrolysis); the use of zero-carbon electricity; the use of biomass for feedstock (charcoal) and carbon capture and storage (CCS); or carbon capture and use (CCU) -or a combination of all these options.…”

“…The most relevant side constraint for each of these four options is indicated here in a simplified way. (For a more detailed discussion see Mayer, Bachner, and Steininger, 2019). Recently, Austrian steel producers, in particular Voestalpine AG (the largest steel-producing company in Austria and one of the leaders worldwide), have acknowledged the last option to be one possible pathway to follow, which would require switching to new processing technologies within the coming two decades (i.e.…”

“…Recently, Austrian steel producers, in particular Voestalpine AG (the largest steel-producing company in Austria and one of the leaders worldwide), have acknowledged the last option to be one possible pathway to follow, which would require switching to new processing technologies within the coming two decades (i.e. hydrogen-based instead of coke-based oxygen reduction of iron ores), thereby rendering deep decarbonisation of the sector possible (Mayer, Bachner, and Steininger, 2019).…”