In a significant shift within the automotive and steel industries, a new wave of 'green steel' is emerging, notably embraced by leading automotive manufacturers such as Volvo. These companies are beginning to market their vehicles made from this sustainable steel as “fossil-free”. The integration of green steel, which often comes at a higher cost—estimated to add up to a few hundred dollars per vehicle—supports automakers’ internal targets to reduce emissions, aligning with increasingly stringent environmental standards.
The innovation behind this sustainable approach is largely influenced by legislative changes in the European Union. In December 2022, the European Parliament enacted the Carbon Border Adjustment Mechanism (CBAM), which is set to take effect in 2024. Under this legislation, importers of carbon-intensive products, including steel, are mandated to report the carbon emissions linked to their materials. A critical element of the law is the introduction of fees, commencing in 2026, which will be proportionate to the carbon footprint of these materials. Such measures are anticipated to incentivise a shift towards decarbonisation among EU domestic producers and those importing steel into the region.
Stegra, a notable player in the green steel market, is strategically positioned to benefit from this evolving landscape. The company is set to receive substantial financial backing from the European Commission amounting to €265 million, alongside an additional €250 million from the EU’s Innovation Fund to assist in constructing its production facility. However, as Charlotte Unger, a researcher at the Research Institute for Sustainability in Potsdam, Germany, notes, while the law may act as a catalyst for decarbonisation, green steel manufacturers may require further subsidies to support the scaling up of their operations.
To sustain its competitive edge, Stegra is actively working on optimising its operations and increasing revenue streams. Olof Hernell, the chief digital officer at Stegra, highlighted that the company has made considerable investments in digital technologies aimed at enhancing efficiency. A notable innovation is the implementation of a semi-automated system that modulates electricity usage based on the fluctuating prices on the energy grid, thus improving operational cost-effectiveness.
Recognising a lack of comprehensive software solutions to effectively track emissions throughout the steel manufacturing process, Stegra has embarked on developing its own carbon accounting software. Following the completion of this software, the company plans to launch it as a part of a new spinoff initiative. Hernell emphasises the critical importance of this accounting capability, as it underpins the company's pricing strategy, stating, “we ask for a pretty significant premium, and that premium lives only within the promise of a low carbon footprint.”
In summary, the integration of green steel within the automotive industry signals an important evolution in manufacturing practices, driven by regulatory frameworks and market demands for sustainability. As companies like Stegra innovate and adapt to these changes, the future of steel production and its implications for business practices in Europe appear poised for a transformative shift.
Source: Noah Wire Services