The steel industry and shipping are linked: steel is shipped around the world and those emissions contribute to climate change while ships are built of steel. A new report urges shipping chiefs to include the use of green steel in production and reveals that it offers a useful contribution to reducing carbon emissions in the maritime sector
Current efforts in international shipping’s decarbonisation are very much focused reducing fuel-related emissions – from hydrogen fuel and wind power to digital mapping and weather forecasting to reduce whole journey emissions. However huge reductions can be achieved by progressively switching to steel with lower embodied CO2 emissions.
The 2023 Breakthrough Agenda, the annual collaboration between the International Energy Agency (IEA), the International Renewable Energy Agency (IRENA) and the UN Climate Change High-Level Champions, found that both total CO2 emissions and direct CO2 emission intensity from the steel sector need to fall by around 25% by 2030 to be on track for net zero by mid-century. This corresponds to a 3% decrease every year this decade. While the steel sector is not yet on track to meet international climate goals, collaboration in key areas, such as standards and regulation, financial and technical assistance, and market creation, can help.
Shipping has a dual role to play in this transition – as a buyer of green steel for shipbuilding, containers and infrastructure, and as a supplier of steel scrap from ship recycling. Additionally, the shipping sector transports a big proportion of steel produced globally, impacting the steel industry’s scope 3 emissions. This further highlights the interconnectedness of the two sectors and the need for collaboration in strengthening their decarbonisation efforts.
The report opens with a stark warning: “Action this decade will be crucial to head off the worst effects of climate change. Some of the solutions required to decarbonise certain sectors are not yet deployed at scale, and can take several years to develop, meaning first steps towards deployment are needed now. What’s more, investment in clean energy technologies and low-emission products and materials tends to be concentrated in advanced economies, and not in the countries undergoing the most rapid development and economic growth.”
Currently, “green steel” is used as a catch-all term for steel with lower embodied emissions with various definitions suggested by different institutions. Going forward, it is preferred that the steel sector agrees on a definition based on clear GHG emissions reduction thresholds that also considers environmental, social, and socio-economic sustainability aspects.
An analysis by Lloyd’s Register Maritime Decarbonisation Hub and UMAS found that international shipping could save 776 million tonnes of CO2 cumulative emissions between 2024 and 2050 by progressively adopting hot rolled steel with lower embodied carbon (i.e. produced through lower emission processes and material inputs). Hot rolled steel is highlighted in this analysis as the Science Based Targets initiative (SBTi) steel sector guidance currently covers steel in this condition, and hot rolled steel represents the majority (over 80 percent) of steel tonnage used for shipbuilding.
The report says current efforts on clean energy and sustainable solutions, while improving, are not yet delivering the levels of investment and deployment required to meet international climate goals. In response, it calls on governments to strengthen collaboration in key areas – such as standards and regulation, financial and technical assistance and market creation – to turbocharge the transition.
The second annual report assesses progress made since 2022 in priority areas for international collaboration, and sets out a series of recommendations for countries to work together in each sector to help reduce emissions over the next decade and stave off the worst effects of climate change. The report shows how the transition to clean energy and sustainable solutions is accelerating across many sectors, with unprecedented expansion in technologies such as electric vehicles and solar PV.
It highlights that electric passenger cars are set to account for 18% of total car sales in 2023, while investment in clean energy technologies is significantly outpacing spending on fossil fuels. But other high emissions and hard-to-abate sectors such as steel, hydrogen and agriculture are not transitioning quickly enough despite encouraging progress in some areas.
The report found that in the past year, only modest progress has been made in strengthening international collaboration in the areas where it is most needed. Progress has been made in expanding financial assistance to developing countries in some sectors, and in joint research and development initiatives. But much more progress is needed in aligning policies to create demand for clean technologies, and in establishing dialogue on trade in sectors where this is likely to be critical to the transition.
In most sectors, participation in the leading initiatives for practical cooperation still falls short of a majority of the global market. The report argues that greater political commitment is needed to progress from softer forms of collaboration, such as sharing best practice, to harder forms such as alignment of standards and policies, which are more difficult but can yield greater gains in mobilising investment and accelerating deployment.
This report is part of the IEA’s support of the first global stocktake of the Paris Agreement, set to be finalised at COP28, the UN Climate Change Conference in Dubai currently. Find other reports in this series on the IEA’s Global Energy Transitions Stocktake page.
