Final Report and Recommendations

Net Zero Steel Pathway Methodology Project

Final Report and Recommendations

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Executive Summary 

 

The steel industry faces an unprecedented challenge in contributing to the Paris Agreement objectives of limiting global temperature rise to well below 2.0°C above pre-industrial levels, and to pursue further efforts to limit the temperature increase to 1.5°C. Several organisations and collaborative groups, through their initiatives, have sought to help companies make 2050 ‘net zero’ commitments1, most notably the Science Based Targets initiative (SBTi). Using the SBTi protocols, some sectors have developed Science Based Target (SBT) guidance specific to their sectoral needs. However, to date, there has been limited specific guidance for the steel sector.

This report is a starting point for developing robust guidance for steelmakers who wish to make a realistic and credible commitment to a net zero or ‘SBT’. It is hoped that that this will also open a dialogue with stakeholders on the challenges faced by the steel industry in setting ambitious targets and agreeing on what the right approach for steel is.

The current steel sector decarbonisation approach (SDA) under the SBTi treats the sector as homogenous, assessing a company’s carbon intensity target against a single carbon budget for steel, without distinguishing between steel produced from iron ore (primary steel) or steel produced from scrap (secondary steel). Additionally, a company should only include scope 3 emissions if they surpass a 40% threshold, yet within the steel sector there is a high degree of variability in scope 3 emissions reporting between different steel companies. This variability makes it difficult for stakeholders, including financial institutions, to assess the performance and ambition of companies against their peers. The SBTi recognises some of these challenges and is planning to start a collaborative project with the steel sector to develop specific steel sector guidance to help enable more steelmakers to set science based targets.

The Net Zero Steel Pathway Methodology Project report proposes a basis for consistency by articulating a set of key principles to underpin steel sector guidance for net zero targets. These aim to facilitate companies to become consistent in how they measure and set GHG reduction targets, in line with the contribution needed from the sector. Alongside these principles, more work is needed to determine the relevant GHG budgets relevant to both primary and secondary steelmaking, in line with climate science.

Such consistency will enable stakeholders to have more confidence and understanding of what is behind those commitments. With the publication of this report, we are presenting to broader stakeholder initiatives a foundation stone for how the decarbonisation progress of steel companies can be consistently assessed. Where stakeholder initiatives are developing steel sector frameworks, such as the SBTi, Assessing the Low Carbon Transition (ACT), the Energy Transitions Commission (ETC) and the Center for Climate Aligned Finance, we believe this report will provide an invaluable input to their design.

We envisage the content of this report to provide the starting point for the SBTi’s development of more detailed technical guidance for the steel sector, and are ready to support both this and other initiatives in their endeavour.