Policy brief

Decarbonising steel and other base metals: let’s send the right signals

Steel production is one of the major activities to decarbonise. Recycling, which emits much less than “primary” (ore-based) production, may appear as the solution. But the available steel scrap is already widely collected and recycled. It will cover a growing proportion of the world’s steel supply, but will not exceed 50% by 2050, a long way from complete circularity. Curbing steel demand and technologically decarbonising its primary production are thus paramount. By activating these two levers, Europe could play a pioneering role and reduce some of its dependencies.

Published on : 23/01/2025

Temps de lecture

2 minutes

By contrast, many corporate or public climate policies rely on accounting tools that regard steel as greener when it incorporates a higher share of recycled material. In a world where the decarbonisation drive is still uneven, these tools tend to simply reorganize scrap flows towards the market segments covered by these policies, and so fail to trigger the aforementioned levers. Yet, some accounting methods and standards seek to avoid this bias. Their further development would better incentivize steel demand curbing, and emission reductions in primary production.

Beyond these debates on standards and their intricacies, carbon pricing should be considered the first-order policy for industry decarbonisation. However, its European implementation (ETS-1), where free allowance will be replaced with the Carbon Border Adjustment Mechanism (CBAM), so far relies on carbon accountings that leave open a similar loophole. Left unchanged, it would tend, for the main base metals, to translate much of the European lead in decarbonisation into a mere attraction of scrap and scrap-derived products to Europe − a case of “carbon leakage”.

The urgency of extending the CBAM towards downstream products is already well-recognised. The here-identified scrap loophole should be added to the list − a point also made by the recent Draghi report. Addressing this category of loopholes would contribute to a less circumventable, but not more complex, CBAM.