Decarbonization of the steel industry: a challenge for the coming decades The sponsor of the study The strategic vision of Metinvest Group is based on the principles of sustainable development, ensuring a balance of economic issues, social progress and responsibility for the environment. Today the combat against climate change and decarbonization of the economy are in the first place globally. This is a difficult task without single-valued algorithm. Therefore, Metinvest Group decided to contribute to the search for possible ways to decarbonize the Ukrainian iron & steel industry and the Ukrainian economy as a whole and became a sponsor of the study “Decarbonization of the steel industry: a challenge for the coming decades”. The partner of the study Deep study of decarbonization technologies, their features, and possible consequences for the industry became possible thanks to the involvement of the Austrian consulting company Horst Wiesinger Consulting as a partner in this study. The expertise of Horst Wiesinger Consulting specialists allowed a systematic approach to the study of such a complex issue as decarbonization of the steel industry. Horst Wiesinger Consulting has significant experience in implementing energy efficiency projects on iron & steel plants. The company is also a consultant for R&D projects. gmk.center PAGE TABLE OF CONTENTS 4 Horst WIESINGER: “Decarbonization — challenge for the coming decades” 5 Yuriy RYZHENKOV: “Decarbonization of the steel industry to encourage decarbonization of other sectors“ 6 The steel industry strives to achieve carbon neutral status 7 Decarbonization of the steel industry requires breakthrough technologies 10 Carbon-free production technologies — at the stage of development 20 Some difficulties restrict decarbonization opportunities 21 Decarbonization requires significant investment 22 Decarbonization prompts an increase in production cost 24 Steelmaking companies are actively investing in R&D 37 Steelmakers set ambitious emission reduction targets 38 The steel industry will radically change in 2050–2070 41 Ukraine is actively contributing to the decarbonization process 44 About the Metinvest Group 46 Stanislav ZINCHENKO: “Ukraine should adhere to all the best practices in decarbonization policy” 47 Contact Information gmk.center 3 DECARBONIZATION OF THE STEEL INDUSTRY: Horst WIESINGER: “Decarbonization — a challenge for the coming decades challenge for the coming decades” Horst WIESINGER: “Decarbonization — Dr. Horst Wiesinger, challenge founder and CEO of Horst Wiesinger Consulting Head of Supervisory Board for the coming decades” of GMK Center ver the past 50 years, the steel industry has been The EU is moving towards the carbon-free under pressure of environmental challenges. At first, economy in the framework of the Paris Agreement. A O concerns were raised over visible pollution (smoke, discussion of possible goals and tools of the reduction dust). This could be seen on the example of the first official of СО2 emissions is expected to end in 2021 so as air pollution control regulation, Technical Instructions on to start a transition. The discussion’s effectiveness Air Quality Control, adopted in Germany in 1964. These is proved by the conclusion of the European Green instructions set emission limits for dust, sulfur dioxide, Deal. It is a strategy for the EU to achieve a climate- nitrogen oxides and other compounds. Although the neutral economy by 2050. document was binding in Germany only, many European This ambitious goal could be achieved only in countries decided to follow its recommendations. interaction of governments and plants. Carbon- Public interest in environmental issues substantially free technologies, represented mainly by individual increased following accidents at chemical plants. In July solutions and research projects, are at a fledgling 1976, an industrial accident at a chemical plant near stage. In the steel industry, the first wave of cutting- Seveso, Italy, resulted in a release of dioxin. In December edge technologies on an industrial scale could be 1984, an accident at a chemicals plant in Bhopal, India, expected after 2035 at the earliest. released poisonous gases, killing 3 thousand people. Funding of decarbonization remains the key Following these events, the European Commission problem affecting the industry. For steelmaking started to collect environmental data on industrial companies, decarbonization primarily means a production. It resulted in the adoption in 1996 of growth in capital investment. The EU is ready to Council Directive concerning integrated pollution partially compensate for these costs as part of the prevention and control. Directive 2008/1/EC of European Green Deal, realizing that it is impossible 2008 substantially amended the previous document. to implement such global project without government The main idea of the document is that the emission support. It is also apparent that decarbonization will permit is granted only if a plant complies with increase the cost of production and, as a result, cause the ‘best available techniques.’ The ‘best available a loss of competitiveness of European steelmakers. techniques’ are described for all sectors, including To solve this problem, the EU is going to introduce steel production. a сarbon border adjustment mechanism, a special tax The ‘best available techniques’ lack requirements on cheaper imports from countries with less stringent for СО2 emissions, which are becoming increasingly CO2 emission standards. important. In 2015, the Paris Agreement on Climate The defined CO2 reduction target can only be Change was signed. However, two years later, in 2017, met by the full commitment of the global industrial the USA left this agreement. The parties agreed to community involving all CO2-emitting sectors. It is keep the increase in global average temperature to evident that the target can only be met by a consorted well below 2°C above pre-industrial levels and to and holistic approach of the world community and pursue efforts to limit the increase to 1.5°C. would need a rather long transition period. 4 gmk.center Yuriy RYZHENKOV: “Decarbonization of the steel industry to encourage decarbonization of other sectors“ Yuriy RYZHENKOV: “Decarbonization of the steel industry to encourage decarbonization Yuriy Ryzhenkov, of other sectors“ Metinvest Group CEO he steel industry will play a key role in achieving therefore take a lead in achieving the declared strategic carbon neutrality in Ukraine. Metinvest, as the goals for decarbonization and carbon neutrality. T country’s largest steel producer, is clearly aware Achieving carbon neutrality is a challenging task of its responsibility for this process. We are confident that requires a complete restructuring of production that our Group will take a lead in decarbonization of processes. At the same time, breakthrough Ukrainian industries, setting an example for others technologies are under development. To enhance the on the path to this important target. resilience of our business, we intend to participate Environmental protection is one of the core in R&D projects to develop and introduce advanced values of the Metinvest Group. For many years, we decarbonization technologies. have been working to provide up-to-date, energy- Metinvest is currently developing a 10-year roadmap efficient and eco-friendly production at our assets. to cut CO2 emissions. We are very careful about every Over 15 years, Metinvest has invested UAH 80 step we take to achieve carbon-neutral production billion in environmental projects. Furthermore, we in the long run. These ambitious transformations are annually increasing green investments. In 2020, should not harm sustainability of our business. every third dollar of our investment was spent on Understanding that Metinvest is the largest employer environmental projects. This is yielding results, as and taxpayer, apart from technological solutions, we are gradually reducing our environmental impact we address issues within the interests of stakeholder through contributing to combating climate change. groups such as our employees and local communities. The measures taken by the Group are aimed at mitigating Decarbonization poses a number of challenges for the environmental footprint at all stages of the production steelmaking companies. To make all stakeholders process. To this end, Metinvest applies an integrated understand business needs, potential risks and approach to automated environmental protection, implications of decarbonization, we consider it enabling to manage environmental performance and important to raise awareness of the parties concerned. risks in the medium- and long-term perspective, With that in mind, Metinvest sponsored this study. standardize environmental business processes, forecast Awareness-raising will help improve communications and proactively identify potential environmental risks. and relationships, including between businesses and Our efforts in environmental activity have been the government. This is the only way for building new highly appreciated by the international community. ‘green’ industries and a new economy. Steel producers Metinvest is among the world’s 10 top steel producers make steel for wind turbine towers, new light-weight in terms of environmental risks. alloys for vehicles, structures for construction. Hence, The Metinvest Group is a global player that operates a success of decarbonization of the steel industry will in accordance with the best practices. We must encourage