How Green Steel Helps Companies Cut Scope 3 Emissions

As businesses strive to meet their sustainability goals, reducing Scope 3 emissions — indirect emissions occurring in the value chain — is becoming a top priority.

Adopting green steel can play a crucial role in lowering such emissions for companies that purchase and use steel in their products or operations.

What is green steel?

Green steel refers to steel produced with significantly lower carbon emissions than traditional steel-making methods.

Producers typically make environmentally friendly steel using innovative processes and renewable energy sources. Some key strategies for producing green steel include:

• Renewable energy: Using solar, wind or hydropower instead of fossil fuels to power steel production.
• Hydrogen-based direct reduction: Employing advanced technologies such as hydrogen instead of carbon-reducing iron ore.
• Increased recycling: Incorporating more recycled steel into the production process minimises the need for virgin raw materials.

These approaches reduce greenhouse gas emissions and help industries make more sustainable choices.

H2 Green Steel is a company focused on producing green steel, a process designed to significantly reduce carbon dioxide emissions compared to traditional steelmaking methods.

Established in 2020, the company is developing a large-scale production facility in Boden, Sweden, with the aim of producing 2.5 million tonnes of green steel annually by 2025 and potentially expanding to 5 million tonnes by 2030.  It's partners include Scania, Exor and Mercedes Benz.

The production process utilises green hydrogen, which is generated from renewable energy sources, as a substitute for the coal typically used in steel manufacturing. This approach addresses the steel industry's notable contribution to global CO₂ emissions, which accounts for over 7% of the total, and aligns with ongoing efforts to promote more sustainable industrial practices.

Hydrogen has emerged as a promising solution for reducing carbon emissions, particularly in heavy industries like steel manufacturing.

According to Mitsubishi Heavy Industries Group (MHI), "when burned, hydrogen emits only water. And if that hydrogen is produced via electrolysis using just water and renewable electricity, then it is completely free of CO₂ emissions."

Furthermore, if the hydrogen is produced through electrolysis using renewable electricity and water, it is completely free of CO₂ emissions, a process known as "green hydrogen."

Hydrogen can also be produced with lower carbon footprint using fossil fuels and carbon capture, utilisation and storage (CCUS) technologies, referred to as "blue hydrogen."

How does green steel reduce Scope 3 emissions? 

Adopting green steel can substantially lower Scope 3 emissions for companies that consume large amounts of steel.

Firstly, traditional steel production is highly carbon-intensive, contributing 7-9% of global greenhouse gas emissions. Companies can dramatically reduce the carbon embedded in their supply chains by switching to green steel.

This is particularly impactful for companies that rely heavily on steel, such as those in the automotive, construction and manufacturing sectors.

Secondly, for manufacturers, the carbon footprint of raw materials often represents a significant share of a product's total lifecycle emissions.

Green steel can help lower the carbon footprint of the final product by reducing emissions from the steel used. This is particularly valuable for companies aiming to offer more sustainable products to their customers.

Thirdly, in industries where the use phase of a product generates considerable emissions, such as the automotive sector, green steel can provide additional benefits.

It is often lighter than traditional steel, which can improve fuel efficiency and reduce emissions over the vehicle's lifetime. Thus, companies that use green steel can contribute to reducing their customers' carbon footprint.

The impact of using green steel can be significant. Some green steel producers report up to 95% lower CO2 emissions than traditional methods. For example, a car manufacturer using green steel could reduce their Scope 3 emissions by several tons per vehicle produced.

Challenges and considerations

While green steel offers substantial potential for reducing Scope 3 emissions, there are some challenges:

• Availability: Green steel production is still scaling up and may not be available in all markets.
• Cost: Green steel can be more expensive currently, though prices are expected to become more competitive as production scales.
• Verification: Companies need robust systems to verify the emissions reductions claimed by green steel suppliers.

Pioneers in green steel adoption

Five leading Green Steel providers:

• H2 Green Steel is pioneering green hydrogen as a reducing agent in steel production, significantly reducing carbon emissions. Its facility in Boden, Sweden, aims to cut CO2 emissions by up to 95% compared to traditional methods.
• Boston Metal specialises in molten oxide electrolysis (MOE), a technology that reduces metal oxides using electricity, eliminating the need for carbon-intensive processes. Its method can substantially decrease carbon emissions and energy consumption.
  
• ArcelorMittal is a significant steel producer investing in green steel technologies and projects to reduce emissions and transition towards more sustainable production methods.
• Aço Verde do Brasil is a Brazilian company that has achieved carbon-neutral steel production using renewable power and biocarbon, replacing traditional coal. It is certified for its low CO2 emissions per tonne of steel produced.
• Gerdau, another Brazilian producer, uses charcoal as a reducer and is the largest recycler in Latin America. The company is working towards significantly reducing CO2 emissions in its steel production processes.

The role of green steel certificates

Green steel certificates offer a complementary approach to reducing Scope 3 emissions.

Steel producers implement decarbonisation initiatives and the resulting emission savings are quantified and allocated to certificates.

Companies can then purchase these certificates alongside their steel purchases. By doing so, they are able to claim an equivalent reduction in their Scope 3 emissions.

Independent third-party auditors typically verify the emission reductions and certificate issuance to ensure credibility, and this approach aligns with the GHG Protocol Corporate Accounting and Reporting Standard, allowing companies to report these reductions accurately.

However, green steel certificates do face some challenges. The potential for reducing emissions is limited by the actual decarbonisation achieved by steel producers.

There are also concerns about the additionality and baseline setting for calculating emissions reductions, and the certificates do not always represent steel produced with substantially lower emissions than industry benchmarks.

By choosing green steel, companies can support the industry's transition to sustainable practices and achieve significant reductions in their Scope 3 emissions, aligning with global sustainability goals.

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