A Preliminary Study on the Green Development Strategy of EU Steel Industry
A Preliminary Study on the Green Development Strategy of EU Steel Industry
Green and low-carbon is one of the important development themes of the world steel industry. According to relevant statistics, the steel industry, as a resource-intensive industry and a typical high-carbon emission industry, accounts for about 8% of the global total energy consumption and 7% of the global total carbon dioxide emissions. Since the beginning of this year, the United Kingdom, Germany, Spain and other European countries have announced that they will invest a lot of money to support their own steel manufacturers “to a green future.” In fact, “green steel” is not a new concept in Europe. In recent years, the European steel industry has been operating under pressure under the carbon neutrality targets set by EU member states according to their own reality, but it has also gained.
How many funds and projects are behind the European Green New Deal?
The European Green New Deal (hereinafter referred to as the New Deal) is the medium – and long-term development strategy of the EU to promote environmental governance and economic development, and is also a programmatic document for the EU to lead the green development of its member states and even the world. On December 11, 2019, the European Commission published a new development strategy document, the European Green New Deal, which sets out the goal of achieving net zero greenhouse gas emissions and decoupling economic growth from resource use by 2050. Emphasis is placed on protecting the EU’s natural resources and protecting the health and well-being of citizens from risks associated with environmental change. In July 2021, the new policy was officially implemented.
In order to advance the New Deal, the EU actively builds a predictable and simplified regulatory environment, supports the rapid application of “net zero manufacturing technology”, and focuses on the following areas of action:
The first is the introduction of the Net Zero Industry Act to support the development of key technologies in the EU. The Net Zero Industries Act will provide a simplified regulatory framework for the region to implement key technologies such as electrolyzers and carbon capture and storage. Before each key technology is formally used, it needs to be carefully analyzed by relevant departments and carefully investigated the basic situation of the global supply chain and value chain in order to promote the rapid promotion of key technologies in the region.
The second is the introduction of the Critical Raw Materials Act to ensure supply chain security. The Key Raw Materials Act aims to establish a safe and secure supply chain for the EU by including raw material extraction, processing and recycling technologies and ensuring that these technologies meet strict environmental standards, such as reducing energy consumption and developing bio-based alternatives.
The third is the establishment of a European Energy Platform working group. On May 25, 2022, the European Commission announced the establishment of a working group on the European Energy Platform to coordinate the use of infrastructure across sectors and to engage in in-depth communication with international partners to set short-term energy price caps for the market.
Fourth, we will strengthen infrastructure development. On 28 March this year, the European Council and the European Parliament reached a provisional political agreement on the Alternative Fuel Infrastructure Regulation, which will see charging infrastructure and alternative fuel-related public facilities installed across the EU in the coming years, especially on the EU’s major transport corridors and hubs. In addition, the EU Battery Regulatory Framework is also a key measure to promote the EU’s goal of carbon neutrality in order to ensure the EU’s global competitiveness in the field of battery production, recycling and reuse. In the future, the EU also plans to issue eco-design regulations for sustainable products to further expand the scale of EU advantageous industrial products.
The EU Green New Deal Investment Programme (EGDIP), also known as the Sustainable Europe Investment Programme (SEIP), is the main funding pillar of the New Deal. To meet the targets set by the New Policy, the EU aims to mobilize at least €1 trillion ($1.1 trillion) in sustainable development financing over the next 10 years. About half of the investment will come directly from EU governments’ own budgets, with the rest coming from public and private contributions.
The European Commission plans to provide €578 billion ($640.4 billion) for “climate spending” between 2021 and 2027, accounting for 32.6 percent of the total EU government budget. Among them, the following funds and projects deserve attention:
The first is the Recovery and Resilience Facility. The fund is a temporary measure introduced by the European Union. The Commission plans to raise money through the fund by borrowing from the region’s capital markets. At the same time, EU member states can also use the fund to implement a series of reforms, mainly including green transformation, digital transformation and other key directions. Among them, investments in the direction of green transition have so far amounted to 18.1 billion euros (about $20 billion). On February 21 this year, the Council of the European Union announced that the “EU Renewable Empowerment” project will be included in the Recovery and Resilience Fund to better support the EU’s transition from dependence on Russian fossil fuels. This means that EU member states will henceforth be able to include the EU Renewable Empowerment programme in their national Recovery and Resilience funds in order to finance key investments and reforms to achieve energy plan targets. At the same time, the EU will approve 20 billion euros ($22 billion) to finance related investment and reform projects, 60% of which will come from innovation funds and 40% from carbon trading credits.
The second is the EU Cohesion Fund. The Fund provides support to Member States whose per capital GNI is less than 90% of the EU average of 27 member States, in order to strengthen the economic, social and territorial cohesion of the EU. The Fund mainly supports investments in environmental development in the field of transport infrastructure and in the construction of trans-European transport networks. On March 20, the European Commission approved 124 million euros ($137 million) for the construction of a 253-kilometer gas pipeline in Poland. The money will come from the EU Cohesion Fund for the 2014-2020 budget period.
The third is the Connecting Europe Facility. In March 2021, the European Parliament and the Council of the European Union approved the European Commission’s plan for the European Connectivity Facilities Fund from 2021 to 2027, with a capital scale of 33.7 billion euros (about $37.3 billion), of which 25.8 billion euros (about $28.5 billion) will be used for the construction of European transport projects. 5.8 billion euros (about $6.3 billion) for cross-border renewable energy projects and 200 million euros (about $221 million) for 5G networks. The fund will provide financial support for the construction of key projects in the fields of transport, energy and digital infrastructure in Europe, support the green and digital transformation of related industries, and help achieve the strategic objectives of smart and sustainable transport.
The fourth is to invest in the European Union Program (InvestEU). In June 2018, the European Commission proposed to implement the Invest in the EU Programme during the EU’s long-term budget period (2021-2027), which would integrate the EU government budget into the common system by way of loans and guarantees. A key component of the plan is a €38 billion ($42.9 billion) guarantee program, which the EU hopes will leverage private banking and other investors to lower the cost of financing private sector investments, thereby doubling the total amount invested in the program. The main sources of financing for the program include the European Investment Bank, the European Bank for Reconstruction and Development (ERBD), the World Bank and the European Council Development Bank (CEB).
Fifth, the Just Transition Fund (JTF). In June 2021, the European Commission formally approved the establishment of the Just Transition Fund (JTF) as the first economic pillar of the Just Transition Mechanism (JTM). The fund will have €17.5 billion ($19.3 billion) earmarked for EU member states where fossil fuels play an important role in the economy, in order to reduce the negative impact of their green transition on their economies. Poland will receive 3.5 billion euros ($3.8 billion), the largest amount, accounting for 20 percent of the fund. Germany could receive 2.25 billion euros ($2.4 billion); Croatia could receive 169 million euros ($187 million). The funds will be invested in the EU’s areas of emission reduction and employment protection, supporting productive investment in small and medium-sized enterprises, the creation of new companies, technological research and innovation, environmental restoration, clean energy, worker promotion and retraining, job search assistance and active inclusion in job seeker schemes, as well as for the retrofit of existing carbon-intensive facilities. The Just Transition Mechanism, a key tool to ensure the EU’s transition to a “climate-neutral” economy, will raise around €55 billion (US $60.7 billion) for the EU’s most affected regions in 2021-2027 to reduce the socio-economic burden. The mechanism consists of three pillars: the Just Transition Fund, the Just Transition Programme under the Invest in the EU Programme, and the European Investment Bank (EIB) loan facility.
The sixth is Horizon 2020. Launched in the UK on 31 January 2014, Horizon Europe 2020 is one of the world’s largest funding programmes for research and innovation, funded by the governments of the European Union and its 28 member states. Since 2014, the program has invested around 80 billion euros ($88.5 billion) to increase the level of scientific and technological innovation in the European region. A major feature of the program is the combination of scientific research and market demand, and the results are put into products and services, rather than only academic research. In June 2021, the European Commission adopted the “Horizon Europe Main Work Plan 2021-2022”, which intends to invest 14.7 billion euros to fund the development of digitalization, ecological protection and other fields in the region.
In addition, the EU Emissions Trading System (ETS) covers 45% of the EU’s emissions sector. Under the EU ETS, a portion of the EU’s revenue from carbon quota auctions is allocated to the Innovation Fund and the Modernization Fund. Among them, the Innovation Fund focuses on promising low-carbon technology demonstration projects; The Modernization Fund focuses on supporting the modernization of the energy system and improving energy efficiency. The actual amount invested in the innovation and modernisation funds will depend on market carbon prices over the next 10 years.
The establishment of the carbon border regulation mechanism is the most controversial and the most crucial action plan of the New Deal, the main purpose is to avoid “carbon leakage”, that is, the carbon reduction measures taken by a developed country may lead to the transfer of domestic energy-intensive products to other countries that have not adopted carbon reduction measures. Different from other key action plans of the New Deal, there has been controversy over whether to establish a carbon border adjustment mechanism. Some people believe that this move does not comply with WTO rules and will lead to trade conflicts. Others believe the EU is using the climate issue to erect new trade barriers.
What low-carbon projects in the EU steel industry are worth watching?
The European Steel industry established the European Steel Technology Platform (ESTEP) in 2023, and started the ULCOS (Ultra-Low carbon Emission Metallurgy) project in 2004, which aims to develop new low-carbon steelmaking technologies and reduce CO2 emissions per ton of steel by 50% from the current minimum level by 2050. In this context, the EU steel industry has systematically developed different low-carbon metallurgical technology directions and process routes based on the ULCOS project.
In the first half of 2020, EUsteel has identified two technical directions for achieving low-carbon metallurgy: direct carbon avoidance and smart carbon use. There are many technical and process problems to be solved in these two technical directions, so the EU steel industry has planned short -, medium – and long-term key projects for technological innovation. At present, the EU steel industry has a number of projects in the direction of smart carbon use technology is running, among which the representative projects are Carbon2Value project, 3D carbon capture demonstration plant project, the use of blast furnace exhaust gas to produce bioethanol project Steelanol project, waste gas biological fermentation into chemical products Carbalyst? Projects, etc.; In the direction of carbon direct avoidance technology, the EU has 14 projects in planning or have been started, of which Swedish Steel’s world’s first hydrogen-based direct reduction pilot plant officially put into operation in August 2020, successfully produced 100 tons of “green steel” in June 2021, and plans to achieve industrial-scale production capacity by 2026.
In addition to the above two major technical directions, a new generation of technical directions is also accelerating the formation of electrolytic metallurgy, hydrogen plasma melting reduction, molten oxide electrolysis, hydrogen flash smelting and other technologies. It is worth paying attention to which process routes can become mainstream in the future low-carbon transformation of the global steel industry, and it is yet to be verified.