Closer cooperation on international standards hailed at COP28 as foundational to the steel transition

Much of the coverage of COP28 focused on whether the negotiations would agree on a form of phase out of fossil fuels but for those on the ground, also attracting attention were measures to drive the decarbonisation of heavy industry, some of the most challenging aspects of the net zero transition ahead. Across all the industry discussions at COP28, from steel to cement to aluminium, the foundational role of harmonised international standards has been a key feature.

Our CEO, Annie Heaton, and Development and Innovation Director, Shivakumar Kuppuswamy, were both on the ground in Dubai last week for some pivotal announcements that demonstrate how progress at COP is driven not only through negotiations on the agreement but between state and non-state actors in the months leading up to the COP.

The Steel Standards Principles were the first to be launched. To prevent the fragmentation of global trade and to enable effective markets in low emissions steel, we need common definitions of decarbonisation progress based on common measurement standards. The Principles mark a major milestone on this road. At the official launch as part of the World Climate Action Summit on December 1st, Annie spoke alongside World Trade Organization Director-General Ngozi Okonjo-Iweala on the need for harmonised or at least interoperable standards to create a level playing field among the diverse players within the steel industry, to underpin new markets not only for near zero steel but also for the progress steelmakers achieve on the road to near zero.  By the time of Industry Day on December 5th  over 40 standard-setting bodies, international organisations, steel producers and industry associations, from the US to the Gulf, from India to China.  At a celebration event hosted by WTO, Shiv spoke alongside representatives of other organisations pivotal to this initiative, including Worldsteel, UNIDO, the IEA, and the Breakthrough Agenda.

Also featuring on Industry Day was the official launch of the Climate Club, an intergovernmental forum designed to tackle industry decarbonisation with a focus on developing and emerging economies. Launched by ministers from the Chilean and German governments, Annie spoke as part of a distinguished panel of representatives from Climate Club members, ministers from Germany, Chile, Indonesia and Norway. The Climate Club aims to foster the necessary global collaboration between governments on the technology, financial and standards instruments and includes a Matchmaking Platform for priority needs. Already, 35 nations and the EU have signed on to support the Club.

While ambition levels may not differ between developed and developing countries among private sector players, Annie pointed out both the greatest opportunity for developing economies – the new map of resources needed for green ironmaking – and the greatest challenge, which lies in the prohibitive cost of the transition. Changing the economics of steelmaking can come in the form of carbon pricing mechanisms, lead markets, tax incentives or funding support, together with a strong and aligned demand signal. While the lion’s share of the funding will come from the private sector, two actions from the public sector can pave the way by reducing the risks: multilateral lending, and green public procurement. To underpin both of these, we need globally aligned definitions.

Financial investors echoed this need. Establishing a minimum standard and then raising the bar over time was a workable approach to steel decarbonisation highlighted at an event on Engaging the Korean Capital Market for Net Zero Alignment organised by SFOC.

India’s growth and transition in particular featured in multiple events at the COP.  Hydrogen demonstration projects are already underway in India, but steelmakers are acutely aware of the very real challenges that exist – the rapid growth of steel demand, the new infrastructure required for new technologies, the constraints on land, and the slow commercialisation of the market for green steel. Speaking alongside steel industry and civil society representatives at an event hosted by  The Energy and Resources Institute (TERI), Mission Possible Partnership and Climate Catalyst, Shiv reiterated that India’s steel industry is poised at a critical moment needing policy, technology, and finance to drive near-zero steel production, and all these need to be founded on a common language to measure, report and verify progress.

The signs of rising demand for responsible products demonstrating decarbonisation progress are emerging. The Climate Group’s Steel Zero initiative said that 10 million tonnes of steel demand was poised among its members to drive the transition, many vocal about their readiness to pay a green premium. Meanwhile, the First Movers Coalition’s Near Zero 2030 Challenge is underway to help matchmake demand and supply side signals for transformative change. And on public procurement, Industrial Deep Decarbonisation Initiative members Canada, Germany, the United Kingdom and the United States announced their green procurement pledge, whilst the governments of Austria, Japan, and the United Arab Emirates have made a Statement of Intent to work towards key aspects of the Pledge.

A host of other new initiatives featured at the Steel Breakthrough roundtable on Industry Day:  a ‘hydrogen hub’ agreed between the UK and Brazil, and a technical and financial cooperation between Sweden and India under LeadIT. Real headway has been made since COP27. But the Global Stocktake has highlighted the need for far more. We need to pick up the pace. Today there are just 5 near-zero projects committing to final investment decisions. The COP28 commitment to triple renewable energy by 2030 will make more projects possible. But there are many more pieces of the jigsaw to be matured.

The promise of more momentum across the heavy industry sectors came in the form of the Industry Transition Accelerator (ITA). Launched by COP28 President Dr Al Jaber, the ITA aims to speed up progress across sectors by identifying common instruments to drive policy, finance and technology to trigger new investments. Amid these very real signs of promise on driving transformative change to deliver near-zero steel, ResponsibleSteel reminds stakeholders of two observations we have made: firstly, that while 1.5C pathways require a significant take up of near-zero steel by 2030, the entire industry needs to make considerable progress by 2030, whether they operate with blast furnace or electric arc furnace assets. The step-by-step change that steelmakers can make today through investments in existing technology is also vital.  The market must drive this by requiring steelmakers to achieve minimum levels of progress against internationally consistent and credible bands of performance, as well as by rewarding near-zero steel.

Secondly, because scrap is neither universally available nor sufficient in supply to cater for global steel demand, definitions of what is ‘green’ are precarious. It is vital we measure for purpose.  Product carbon footprints that measure emissions alone will not drive the global decarbonisation of the industry.  Annie highlighted this at an evening with CDP CEO Sherry Madera hosted by BCG.  Unless we take a scrap-variable approach to defining progress to net zero, we will not drive real net reductions in global emissions. As the Climate Group puts it, “While we recognise that for some at COP there may be a temptation to push for a recycling-led approach, the reality is that we simply can’t afford to ignore the link between development, steel demand, and decarbonisation.” That means we need both product footprints and scrap variable levels of Progress.

Driving the transition away from unabated fossil fuels will require unprecedented effort from all sides: corporate leadership, government buy-in and public and private financing.  We need stronger efforts to align demand signals, bold policy to change the economics of steelmaking and key interventions to mobilise the investments we need. And we need greater collaboration between countries to drive this globally, at scale, streamlined for maximum impact. At COP28, there were many signs that these elements are starting to materialise. Whether they will be enough, soon enough, is something we can all influence.