Decarbonising the UK Steel Industry

Steel accounts for as much as 9% of global carbon emissions. In this edition of the BS Stainless blog, we focus on the recent recommendations made by the UK Emission Trading Scheme (ETS) and the response to these recommendations that quickly followed from UK Steel.
Earlier this month, the UK government published a detailed response to a consultation with the ETS. The key takeaway from the response is the announcement that the ETS will have a 'tighter limit on industrial, power and aviation emissions' and will maintain the current free allowances until 2026. 

UK Steel, the trade association that represents the steel industry in the UK, was quick to point out that 'gaps are evident' in the details of the proposed ETS reforms. Gareth Stace, UK Steel's Director General, warned that the government would have to provide 'thorough strategic support' to the steel industry in order to help the decarbonisation process to be moving forward by 2026. He warned that a combination of lacking detail and unclear strategy would 'leave steelmakers in the dark'. 

Stace said that it was crucial for UK government ministers to 'shine a light of leadership', specifically by establishing a CBAM (Carbon Border Adjustment Mechanism) before 2026. Such a mechanism would ensure that imported steel, which created high levels of emissions in production, would be subject to carbon costs equal to those imposed on steel made here in the UK.  

In addition to the introduction of a CBAM, government policies will have to be 'packaged together' in order to assist the steel industry to transition to the new production methods designed to reduce emissions, noted Stace. He recommended that the ETS reforms ought to be 'introduced strategically with the CBAM and a long-term capital expenditure strategy', which would provide steelmakers with the financial support that they will undoubtedly need in order to decarbonise. 

Towards the end of his statement on behalf of UK Steel, Stace renewed the association's commitment to decarbonising by 2035 but stated that the only way this could be achieved was if 'the right business environment is created'. He concluded by saying: "There are huge question marks over if Government really wants to sustain steel, the backbone of British manufacturing, or just leave it to shrink and rely on other nations’ supply. Without carefully thought-through government leadership, decarbonising costs will clearly weigh down and suffocate the steel industry."

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