The iron and steel industry plays a vital role in modern society, including the energy transition. But it also comes with significant GHG emissions. This blog post offers an overview of the industry’s production processes, including the different types of GHG emissions, and various mitigation options including the role that CCUS can take.
Iron and steel are essential materials that have played a crucial role in the development of modern civilization. The construction of buildings, bridges, roads, and vehicles, among other things, is dependent on these materials. More than that, they will also be relevant in the energy transition to come, in anything from solar panels, wind turbines, electric vehicles and dams.
However, the production of iron and steel is associated with significant greenhouse gas (GHG) emissions, making it a major contributor to climate change. This blog post will discuss the decarbonization potential in the iron and steel industry, including the different production processes, sources of GHG emissions, and mitigation options, with a particular focus on carbon capture, utilization, and storage (CCUS).
Iron and steel production processes
Making iron and steel can follow several different production pathways, and here we try to give you the basic introduction. The figure below from the IEA shows a good overview of different production processes. While around 70% of all steel comes from primary production, meaning starting with the iron ore, the remaining 30% comes from recycled steel scrap.
Note that the primary/secondary classification can be confusing, because primary production can still use recycled scrap steel as part of the input, and iron can also be used as input in secondary production.
Figure: Main steel production pathways and material flows with 2019 data. IEA, 2020.
Building on the figure, there are three main production processes worth highlighting, with great acronyms! Primary production can happen through either BF-BOF and DRI-EAF, both of these use iron ore as main input. Secondary production happens through EAF, using recycled scrap steel as main input. Together these three methods account for roughly 95% of global steel production. Let’s look at them in closer detail.
BF-BOF stands for Blast Furnace – Basic Oxygen Furnace. In this process, the iron ore is first reduced in a blast furnace using coke. Impurities are removed and the output is pure iron. Next step is to refine the pure iron into steel in a basic oxygen furnace. Here, pure oxygen is blown into the liquid iron to burn off any other unwanted elements and the carbon content of the iron is also lowered. The end result: steel.
DRI-EAF stands for Direct Reduced Iron – Electric Arc Furnace. In this process, the iron ore is first reduced to pure iron in the Direct Reduced Iron furnace. This one works differently from the blast furnace in that no coke is needed in the process, although you do need a reducing gas typically from natural gas or coal. Another difference is that in the DRI, the iron ore is converted to metallic iron without melting it. Once turned into metallic iron, it’s passed on to the electric arc furnace where it’s melted, other impurities are removed and the carbon content is lowered, turning it into steel.
EAF stands for Electric Arc Furnace. In this case, one passes directly from collected and sorted scrap steel to the electric arc furnace, as described above.
Depending on the production pathway, there’s also some raw material preparation involved. For example, the iron ore is either sintered or made into pellets before going into the ironmaking stage. The blast furnace requires coke, which is made from converting coal in a coke oven. And the scrap steel needs to be collected and sorted to match the material properties required.
GHG emissions from iron and steel production
If you think iron and steel production is energy and emissions intensive, you’re correct. According to the International Energy Agency, the iron and steel sector represented about 20% of industrial energy use, or 8% of the total final energy use in 2019. 75% of that energy demand is met by coal, 10% from natural gas and the remainder mostly from electricity.
In terms of emissions, on average each ton of steel produced results in about 2 tons of CO2, with a wide range depending on production pathway used. BF-BOF is on the high end of the scale, while scrap steel-based DRI is the lowest.
GHG emissions from iron and steel production come both from energy generation and process-related emissions, and from several steps in the production processes. Whereas figures vary depending on where you set the system boundaries, a conservative estimate from the IEA shows that the iron and steel industry in total contributed to 7% of global GHG emissions in 2019.
Iron and steel production sites are large industrial complexes, with lots of activities and emission points. An illustration below is from ArcelorMittal’s site in Dunkerque (France), containing 1 coke oven, 2 sinter plants, 3 blast furnaces (BF) and 3 converters (also known as BOF), 3 lade treatment stations, 3 continuous casters and 1 hot rolled strip mill. Some of these are also identified in the figure.
Figure: ArcelorMittal Dunkerque iron and steel site. Google Map, 2023, edited by Endrava.
Let’s take a closer look at where these emissions come from.
The coke oven, blast furnace and basic oxygen furnace create many types of co-product gases, including nitrogen, carbon dioxide, carbon monoxide, hydrogen, methane and more. These are frequently used onsite for power and heat generation to meet local energy demand. It’s great that the sites can reuse these gases locally, but they also come with relatively high footprints. For example, electricity produced from blast furnace gas can give a footprint of 1600 g CO2/kWh produced. That’s about twice that of a coal supercritical steam turbine or more than four times that of a combined cycle natural gas power plant.
There are also other process related emissions that come from reducing the iron ore to iron, in return releasing CO2. Consumption of carbon-based electrodes in the electric arc furnace releases CO2. And, the use of lime fluxes, used to remove impurities and promote liquidity, also generates CO2 emissions. Moreover, sites will sometimes have to import electricity and heat generated elsewhere, typically from fossil fueled generation plants.
All this to say: iron and steel production is a multi-step production process with many emission points along the way. That also means that decarbonization solutions will not be one silver bullet.
Mitigation options for decarbonization
There are several mitigation options for reducing GHG emissions from the iron and steel industry. Recycling is a great place to start, since the scrap steel EAF process requires far less energy (and emissions) than the other production pathways. Unfortunately, recycling rates are already quite high at 85%, and total steel demand is much greater than all the scrap steel available. So, in addition to continuing to find clever ways to reduce our needs for steel and recycle as much as we can, we must also look at how to decarbonize the production processes themselves.
Energy efficiency will help. State of the art facilities have already taken this to practical limits, but there is potential for older plants. And with today’s elevated energy costs, the incentives are aligning well for energy cuts, leading to emission cuts along with cost savings.
As for more elaborate solutions, there will be a range of options to pursue. Hydrogen-based DRI, using low-carbon hydrogen produced from electrolysis or from natural gas with CCUS is one avenue. Shown in the figure below is the production process that SSAB, LKAB and Vattenfall are developing in the Swedish project HYBRIT. Here they aim to produce fossil-free steel, and pilot operation started in 2021.
Figure: Production process for HYBRIT, using fossil-free hydrogen and electricity. Hybrit, 2023.
New ways of smelting reduction, new blast furnace concepts and gas-based DRI, all with CCUS, are other avenues. Shown in the picture below is Al Reyadah, the world’s first fully commercial CCUS facility for the iron and steel industry. CO2 is captured from the DRI furnace and then used for Enhanced Oil Recovery. The project has been capturing 0,8Mt CO2 annually since its launch in 2016.
Figure: Al Reyadah, an Emirates Steel production facility in operation, using CCUS for EOR. Carbon Sequestration Leadership Forum, 2017.
On top of the aforementioned comes possible applications of biofuels and direct electrification. How this will play out across plants and regions is a good question, and beyond the scope of this article. Needless to say, the transformations required will be enormous. To give you an idea, IEA estimates that to reach the targets in its Sustainable Development Scenario (SDS), one hydrogen-based DRI plant per month must be deployed from the moment of market introduction, while one CCUS-equipped plant must be deployed every 2-3 weeks from 2030 onwards.
What can we find in CaptureMap?
In CaptureMap, we have mapped facility-level emissions for over 900 iron and steel production facilities, together contributing more than 2 billion tons of annual CO2 emissions. Some of the largest sites have more than 20 million tons of annual CO2 emissions and only two sites report some use of biogenic content leading to biogenic CO2 emissions. The map below shows the geographic distribution, indicating that these plants are found everywhere in the world.
Figure: More than 900 iron and steel plants in CaptureMap, totalling 2 billion tons of annual CO2 emissions. Endrava’s CaptureMap, 2023.
Looking closer, however, we see that “everywhere” is too generic. In fact, there are large regional variations. The chart below shows that more than ¾ of all iron and steel CO2 emissions take place in Asia, a further 10% in Europe and 7% in the Americas. The country-per-country breakdown shows that China, Indonesia, Japan, Korea and Russia take the top 5 spots.
Figure: Vast majority of CO2 emissions from iron and steel plants come from Asia. Shown is the total annual CO2 emissions across regions and countries with data from Endrava’s CaptureMap, 2023.
Zooming in on Europe, where we have Emission Trading Scheme (ETS) information, it’s interesting to know how the gap between actual emissions and ETS free allowances are distributed. There are 69 sites in total, and we’ve focused on the top and bottom 10 sites. The top 10 sites with green bars are those with the largest surplus of allowances, meaning they emit less than their free allowances and can typically sell these in the market. The bottom 10 sites with red bars are those with the largest deficit of allowances, meaning they emit more than their free allowances and typically have to purchase extra allowances in the market.
The theory goes, the larger the ETS deficit, the greater the business case for implementing mitigation measures. But naturally, there are also many other factors at play. And carbon leakage is a definite risk, where European sites could consider relocation to other countries without carbon taxes. Countermeasures to this, like the Carbon Border Adjustment Mechanism may alleviate the problem, but it remains to be seen how that will work out in practice.
Figure: Top 10 ETS surplus (green) and deficit (red) iron and steel production sites in Europe. The greater the deficit, the more ETS credits the production sites have to purchase in the market, strengthening the business case for mitigation measures. Endrava’s CaptureMap, 2023.
Decarbonization project outlook
According to the European Steel Association (Eurofer), there are more than 60 decarbonization projects in various stages of implementation across Europe with the potential of cutting more than 80 million tons of CO2 by 2030, several of them including CCUS. That’s an excellent start.
What we need next is that a similar engagement and drive transmits to other regions in the world, where the bulk of production takes place. The IRA should be a great enabler in the U.S. As for Asia, we’re optimistic but waiting for more concrete news to be released.