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The steel industry faces a major "decarbonization" challenge.
Release date:
2018-06-08
Source:
Chinese steel companies participating in carbon trading can, in the long term, create an incentive mechanism to phase out outdated production capacities, thereby driving the industry’s transformation and upgrade. Following the power sector's pioneering inclusion in the national carbon emissions trading market at the end of 2017, the steel industry’s carbon trading market is now entering a critical phase of implementation and advancement.
Chinese enterprises in China's steel industry, by participating in carbon trading, can ultimately create an incentive mechanism to phase out outdated production capacities, thereby driving the industry’s transformation and upgrade.
Following the power industry's pioneering inclusion in the national carbon emissions trading market at the end of 2017, the steel sector's carbon trading market is now entering a critical phase of advancement.
Recently, Li Xinchuang, President of the Metallurgical Industry Planning & Research Institute, revealed at the Steel Industry Low-Carbon Transformation Capacity Building and Technology Exchange Conference held in Zhangjiagang, Jiangsu, that a quota scheme for carbon emission rights trading in the steel sector is currently under development.
As a high-energy-consuming industry, the steel sector accounts for approximately 7% of global greenhouse gas emissions. China, meanwhile, is one of the world's largest producers and consumers of steel, contributing nearly 50% of global crude steel output. The industry's carbon emissions represent nearly 15% of China's total carbon footprint—and more than 60% of the entire global steel industry's carbon emissions.
In response, Li Xinchuang emphasized that tackling climate change is a shared responsibility of the global steel industry. He also noted that China’s steel industry and its companies must fully recognize that green, low-carbon development is a crucial direction for deepening ecological civilization construction and reforming the institutional framework in the new era.
Opportunities and challenges coexist.
Looking back at 2017, the global steel industry faced both new opportunities and challenges in its low-carbon transition—such as the International Energy Agency launching a study on a global low-carbon technology roadmap for the steel sector; EU steelmakers reviving three groundbreaking research initiatives focused on low-carbon metallurgy; and China officially kicking off its carbon emissions trading system, which is set to become one of the world’s largest carbon markets. From the perspective of countries already implementing carbon trading schemes, the steel industry generally remains cautious about the process. European steel companies argue that the EU’s ambitious emission reduction targets are driving up operational costs, while many still lack access to cutting-edge technologies and sufficient financial resources to meet these goals. Meanwhile, South Korea’s Steel Association warns that insufficient carbon allowances could disrupt steel production, further exacerbating the industry’s ongoing challenges. Analysts suggest that while Chinese steel firms participating in carbon trading may initially face some short-term drawbacks, the long-term benefits could include a powerful incentive to phase out outdated, high-emission capacity—and ultimately spur the industry’s broader transformation and modernization. By engaging in carbon trading, companies are not only encouraged to optimize their production processes, upgrade equipment, and adopt lower-carbon energy sources, but also motivated to innovate actively, steering clear of high-carbon-intensive products and business practices.
Currently, China's steel companies are actively participating in carbon market trading, with Baosteel being one of the earliest domestic enterprises to engage in carbon trading. Zhang Jiancheng, Assistant President of Shenzhen Carbon Emission Trading Center Co., Ltd., told reporters that during Baosteel's involvement in the pilot carbon emissions trading program, the company actively contributed to the development of Shanghai's relevant policies and standards, organized technical exchanges with specialized institutions, and provided critical support for building Shanghai's carbon trading market. Notably, Baosteel’s carbon emissions steadily declined year after year during the pilot phase, ultimately resulting in cumulative emissions 5% lower than the emission allowances allocated by Shanghai.
In addition, after applying for five CDM (Clean Development Mechanism) projects, Wuhan Iron and Steel has achieved annual emissions reductions of 3.16 million tons of carbon dioxide. Meanwhile, Shougang Group is also actively working on developing national certified voluntary emission reduction projects.
China has pledged to the international community that "carbon dioxide emissions will peak around 2030, with efforts made to reach the peak as early as possible, and that carbon dioxide emissions per unit of GDP will fall by 60% to 65% compared to 2005 levels." As a key sector responsible for significant carbon emissions, the steel industry plays a vital role in fulfilling the nation’s commitments to tackling climate change.
According to statistics, over the past decade, the steel industry has reduced its carbon intensity per ton of steel by approximately 25%, making a significant contribution toward achieving the nation’s climate change goals. However, despite this progress, the industry’s contribution to the low-carbon economy remains insufficient—especially when factoring in the lack of substantial growth in industrial value-added—and the steel sector now faces significant challenges in meeting future targets for low-carbon development.
Driving the industry's low-carbon transformation
The steel industry is a key target and central player in the carbon trading market, and mandatory reductions in CO2 emissions will also drive steel companies to develop low-carbon technologies.
Li Bing, Director of the Low-Carbon Development Research Center at the Metallurgical Industry Planning & Research Institute, stated that technology-driven innovation is the key to leading the low-carbon transformation—encompassing decarbonization technologies focused on process control, carbon-free technologies centered on source-level prevention, and decarbonization approaches prioritizing end-of-pipe solutions.
In preparation for the upcoming carbon trading scheme, major domestic steel companies are actively exploring innovative technologies. According to Bo Hongwei, Deputy Director of the Energy and Environmental Protection Department at Baowu Group’s Zhanjiang Base, Zhanjiang Steel’s steelmaking project has adopted a new technology for recovering and reusing waste heat from converter flue gas. Specifically, the high-temperature, dust-laden primary flue gas from the converter—still in an unburned state—is first routed through a skirt hood and then into a vaporization-cooled flue before entering a dust removal tower. As a result, the flue gas temperature drops from its original 1000°C to 830°C, while steam recovery increases from 80 kg/ton to 9 kg/ton. Importantly, this process ensures that the particulate matter concentration at the flue gas outlet (under standard conditions) remains below 20 mg/m³.
Li Bing also stated that, in the coming period, the blast furnace-converter process will continue to dominate China’s steel industry, with coal, coke, and other fuels accounting for more than 90% of steel companies’ primary energy consumption. Therefore, strengthening the optimization of the raw and fuel supply structure is a crucial component of the steel sector’s low-carbon development. Key areas for focused optimization should include the raw material preparation, coking, sintering, pelletizing, and ironmaking processes in steel production.
"High-carbon energy structures are the primary source of structural pollution in the steel industry. Carbon emissions trading will accelerate the steel sector's transition to low-carbon operations, helping to improve the energy mix and address, at the root, the environmental and ecological issues caused by coal being the dominant energy source," said Li Xinchuang.
He also stated that the steel industry is a key sector for reducing overcapacity, restructuring, and driving transformation. By accelerating green upgrades in line with low-carbon development principles, and by fostering emerging industries such as energy conservation, environmental protection, and renewable energy, the industry can achieve lower costs and more efficient resource allocation—making these efforts a crucial lever for speeding up the shift of the steel industry from "old growth drivers" to "new ones."
Insights from Developed Countries' Low-Carbon Transition
How China can develop a low-carbon economy and low-carbon industries—developed countries' experiences are worth learning from and referencing.
Li Bing stated that Japan has conducted a comprehensive reassessment of the steel industry—from a full lifecycle perspective—focusing on its long-term impact on surrounding industries and people's daily lives, while also expanding the scope of energy consumption evaluations for the sector. Notably, throughout Japan’s journey toward low-carbon development, government-led fiscal policies have played a crucial role in providing support, including budgetary measures, tax incentives, and carbon tax initiatives implemented to accelerate carbon reduction efforts.
Additionally, the German government has demonstrated a strong commitment, setting even stricter standards for itself—beyond merely complying with the EU’s relevant low-carbon directives—thus creating significantly greater challenges. At the same time as these laws were being drafted, Germany has already taken concrete low-carbon actions, focusing particularly on its energy mix, enhancing energy efficiency, and advancing renewable energy development. Moreover, the country has established a carbon trading and emissions system and conducted comprehensive analyses of greenhouse gas emissions.
"China should also promptly shift toward a green development mindset, actively promote advancements in low-carbon technologies, and ensure the practical implementation of low-carbon transformation in the steel industry," Li Bing suggested.
Li Xinchuang stated that, on one hand, China's steel industry and enterprises should actively strengthen communication and collaboration with government departments, staying informed about policy developments and the evolving direction of industry pathways. This will enable them to proactively plan and formulate low-carbon development strategies, ultimately helping the industry and companies secure broader opportunities for growth. On the other hand, low-carbon transformation is an intrinsic necessity for corporate development. Companies must adopt a carbon-focused strategic mindset, embrace innovation, and systematically build robust capabilities for sustainable, low-carbon operations. They should also prioritize strengthening their teams of specialized talent, benchmarking against leading enterprises and cutting-edge technologies, and rigorously implementing practical, effective measures aimed at energy conservation, carbon reduction, and enhanced efficiency and quality.
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