If steelmaking was a country, it would be the third biggest emitter of greenhouse gasses after the United States and China. The steel industry is responsible for up to nine per cent of global greenhouse gas emissions.
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Steel is also one of the most used materials for building and construction alongside concrete and aluminium.
Various governments across Australia including the federal government are developing their sectoral decarbonisation pathways which will hopefully provide a roadmap for each sector’s ability to achieve targets for 2030, 2035 and beyond.
To decarbonise our energy, industry, transport and construction sectors we will need to procure green steel, or a better term might be near zero steel which is defined by the International Energy Agency as 0.4 kilograms CO2 a tonne of steel in comparison to approximately 2 kg CO2 a tonne at the moment for blast furnace steel.
While Australia is a relatively small manufacturer of steel products (about 6 million tonnes per year), we are the world’s largest exporter of iron ore.
We are also a significant exporter of fossil gas and coal (both thermal for coal plants and metallurgical for steel manufacturing).
The greenhouse emissions burned from these materials (Australia’s scope 3) are made into steel and other products and then exported around the world including back to Australia for our construction and transport sectors including motor vehicles
If we are truly serious about decarbonising the steel supply chain, we need to help our trading partners decarbonise their steel manufacturing.
Australia could hold that green iron key.
According to Infrastructure Australia’s recent report on embodied carbon, Australian buildings and infrastructure are directly responsible for almost one third of Australia’s total carbon emissions, and indirectly responsible for over half of all emissions with the upfront carbon making up 7 per cent in 2023.
Unless we take action, we will see a significant increase in emissions given government and industry plans for construction spending.
This week WWF released Australia’s Green Iron Key, a report calling on more concerted action by federal and state governments to collaborate with our trading partners to secure Australia’s future in low emissions iron and steel manufacturing.
With the right investment environment, Australia could be the key to transforming Asia’s steel industry and our construction sector.
The global market is starting to respond with demand signals led by the European Union’s carbon border adjustment mechanism (CBAM) that requires steel makers who want to sell into Europe to reduce their emissions. We are starting to see demand side signals from other markets, including from Australian companies.
The report outlines a series of policy recommendations, starting with the establishment of a $10 billion domestic support package to decarbonise the existing iron ore and steel industry and prioritise the development of export focused green iron projects.
This will not happen overnight, and nobody expects this to be straightforward or easy. This is more sophisticated than a pure industry development play and the federal government’s Future Made in Australia policy sets the right tone for the direction of travel.
The green energy statecraft needs a whole of government response with a deeper bilateral and regional set of agreements with our major trading partners Japan, Korea and China.
If we can give our trading partners the confidence that they can offshore their iron making to Australia – and with Australia developing green electrons and green hydrogen – we can value add our exported iron ore to make green iron pellets. And Australia can move from a “dig em up and ship ‘em out” to a mine and make economy.
Securing a place for Australia in the low emissions economy is a big, complex transition that requires a blend of sophisticated green energy statecraft; joint research and development collaboration and investment strategies that show we understand the future needs of our trading partners; and that future proofs Australia as the strategic partner of choice.
It’s in our mutual economic interests to work together to build out a green iron corridor from Australia to our major trading partners. This will also help our building and construction and transport sectors to decarbonise.
