Written Evidence Submitted by Green Alliance
(HNZ0095)
Clean Steel in the UK
Making the UK a world leader in the production of clean steel
Executive summary
● The UK’s steel industry is at a crossroads. This industry was once the envy of the world but it is in decline. It is also a polluting industry, at odds with our climate change commitments. But we can both invest in our industrial heartlands and take climate action - with clean steel, produced with hydrogen rather than coal. This technology is well on the way with trials underway in Germany, Sweden and China. It’s time for the UK to join the race, before it is left behind.
● The Government should commit to achieving near zero emission steel production by 2035, and to measures to ensure more efficient use of steel. This should be accompanied by support for the trial and commercialisation of hydrogen-produced steel, recognising this as a promising route to both decarbonisation and modernisation of this and other sectors.
● To achieve this, the Government should commit to a phased plan for the industry, bringing forward ambitious targets along with trials which could then lead to the commercialisation of this new technology. The timescales for this plan should be:
○ 2021: A new commitment and plan for the steel industry.
○ 2021/22: A pilot trialling hydrogen-based steelmaking in the UK.
○ Mid 2020s: A clean steel hub and agreed delivery strategy for near zero steel.
● This could be delivered through a competitive tender administered by the Government or through a private-public partnership, with large-scale private funding supported by funds from the Government. The Government has already earmarked £250 million to help the steel industry decarbonise through its Clean Steel Fund. A new at-scale DRI plant could cost around £500 million, but an initial, small-scale proof-of-concept pilot would cost vastly less than this.
● If the Government invests in clean steel it would see benefits across:
○ Innovation and jobs: Clean steel can help revive UK industry, protecting and creating jobs.
○ Reaching net zero: Clean steel can help the UK reach its emissions reduction targets.
○ Levelling up: Clean steel can increase investment and level up left-behind areas.
○ Global Britain: Britain can lead the world on clean steel, potentially increasing trade and exports.
Background - UK clean steel revolution
There are many issues the Government is grappling with, but two stand out. One is reversing the continued decline of our industrial heartlands, perhaps no better exemplified than by the UK’s steel industry. Once the envy of the world, it supported jobs, communities and manufacturing across our country, and played a huge part in our cultural, economic and social heritage. Today, however, the industry in the UK is in decline and is struggling to survive. The future of this strategically important industry is going to be green - and to
secure its future in the UK it is important that action is taken now, before the UK is left behind and while discussions about the future of the industry are centre stage.
The second issue is meeting our climate change commitments. At home, the UK has already committed in law to reach net zero carbon emissions by 2050. Globally, this year marks the UK’s Presidency of COP26 and the UK is a key steering member of the Clean Energy Ministerial. The UK’s two remaining primary steelworks are the two largest single point sources of UK carbon emissions, contributing 15 percent of UK industrial emissions1. The Climate Change Committee has recommended UK steelmaking should reach near zero emissions by 2035.2 Inaction would put additional pressure on other parts of the economy to reduce their emissions. This year, with the UK hosting the COP, it is critical that it underpins its leadership ambitions on climate change with definitive steps towards achieving net zero across as many sectors as possible.
Against this backdrop, it is vital the government adopts an ambitious decarbonisation plan for the steel sector so that the industry is properly future proofed. For a start, this means using and reusing steel as efficiently as we can, so we need less of it. It also means maximising the use of scrap steel within the UK rather than exporting it as waste only to re-import the high value products other countries turn it into.3 These actions alone could deliver a significant reduction in UK steel emissions, and ensure that the UK is able to maximise its export of high value products, where it is best placed to compete globally.
However, there remains a case for UK production of primary steel too. In 2018 only 20% of global steel production was from scrap steel, and the International Energy Agency believes that even at higher recycling rates, scrap availability will put an upper limit on the potential for recycled production globally.4 Even with some experts thinking that the amount of steel available for recycling could triple by 2050.5
It is here that hydrogen-based steelmaking can help: replacing coal as the reduction agent in a dedicated plant, it can produce new primary steel with near-zero emissions. This technique would need to be coupled with electric arc furnaces, retaining and strengthening the UK’s steel recycling capacity. Trials of this technology in other countries are well on their way, including in Germany, Sweden, China6 and France7. It’s time for the UK to join the race or be left behind. With the correct action, the UK can exploit this nascent market and become a world leader, future proofing the steel sector and the UK’s pathway to net zero industry. Below, we set out who we are, what we are proposing, how this can be delivered, and how it will meet the UK’s broader objectives.
What we need
The Government has made available a range of different funds to support industrial decarbonisation including the Industrial Energy Transformation Fund and Industrial Strategy Challenge Fund’s support for
1 Department for Business, Energy and Industrial Strategy, ‘Clean Steel Fund: Call for evidence’, 2019.
2 Climate Change Committee, ‘Sixth Carbon Budget’, 09/12/2020.
3 Green Alliance, Completing the Circle, 2018
4 International Energy Agency, ‘Iron and steel’, June 2020.
5 UK FIRES, Absolute Zero, 2019
6 World Steel Association, ‘Blog: How hydrogen is gaining momentum in the Chinese steel industry’, 16/09/2020.
7 Yorkshire Post, ‘Liberty Steel to work on giant hydrogen steel plant in France’, 22/02/21.
clusters.8 It has also specifically committed £250 million to a Clean Steel Fund to help the UK steel sector decarbonise.9 More support is needed to drive the efficient use, reuse and recycling of steel including further investment in R&D and recycling policy.
The Government is moving faster on its hydrogen policy, having made a series of commitments in its 10 point plan for a green industrial revolution including a target for 5GW of low-carbon production capacity by 2030, technology trials and a £240m fund.10
Both an industrial decarbonisation and a hydrogen strategy have been promised for the coming months. It is vital these move the decarbonisation of steel forward significantly, setting the UK on track for achieving net zero in the sector while safeguarding the future of the industry and people it employs.
The Government should commit to achieving near zero emission steel production by 2035, and to measures to ensure more efficient use of steel. This should be accompanied by support for the trial and commercialisation of hydrogen-produced steel, recognising this as a promising route to both decarbonisation and modernisation of this and other sectors.
● 2021: A new commitment and plan for the steel industry. By COP26, the Government should have set out its commitment to achieve near zero emissions steel production by 2035 and begun detailed negotiations with the sector and other stakeholders on a delivery timeline and supporting policies. It should also be taking concrete steps to improve the resource efficiency of steel use in the UK.
● 2021/22: A pilot trialling hydrogen-based steelmaking in the UK. With plans to trial hydrogen reduction progressing rapidly in other countries, the government should not wait to have a full decarbonisation plan in place before kickstarting a UK pilot. The main aim of the trial would be to test production, create initial capability, develop world-leading expertise, and create a new anchor market for hydrogen. This should be in a strategically important location in the UK and could then be ramped up.
● Mid 2020s: A clean steel hub and agreed delivery strategy for near zero steel. The long-term vision for the Government should be to build a clean steel hub in the UK that can provide low carbon, hydrogen reduced iron around the country as needed. Ideally this would be powered exclusively with renewable (green) hydrogen but fossil (blue) hydrogen could be used as an interim solution. The hub could be built in a strategic part of the country, maximising local resources and steel-making expertise. With at least some clean primary steel production secured, plans could be finalised on managing an equitable transition to low carbon production at other UK steelmaking sites. An agreed delivery strategy for net zero steel should make use of recycled steelmaking in the UK and press for more efficient use of steel in the longer term.
How will it be delivered and how much will it cost?
8 UK Research and Innovation, ‘UKRI announces winners of industrial cluster competition’, 04/01/2021.
9 The Department for Business, Energy and Industrial Strategy, ‘Creating a Clean Steel Fund: call for evidence’, 14/12/20.
10 The Prime Minister’s Office and the Department for Business, Energy and Industrial Strategy, ‘The ten point plan for a green industrial revolution’, 18/11/20.
Our proposal could be delivered through a competitive tender administered by the Government and with private funding backing initial funds from the Government. A new at-scale DRI plant could cost around
£500 million, but an initial, small-scale proof-of-concept pilot would cost vastly less than this.
The initial pilot trialling clean steel could be funded in partnership with any number of interested businesses, possibly including the Jingye Group, the owners of the Scunthorpe steelworks plant, or Tata Steel, the owners of Port Talbot.
Crucially, existing Government commitments could provide much of the funding. The Government has already set aside £250 million in the Clean Steel Fund and may also be able to make use of funds committed to industrial clusters and hydrogen. Given the lack of consensus on the Clean Steel Fund’s best use and developments since the previous consultation, it could use at least some of this money for the purpose. More importantly, initial costs to get clean steel off the ground will pale in comparison with the economic benefits it will bring, in investment, jobs and exports.
What this means for the UK
Our policy proposition is this. If the Government invests in low-carbon steel manufacture and use it will see social, economic and cultural benefits. As noted above, the two key objectives that can be met are:
● Innovation and jobs: Low carbon steel will revive UK industry, and protect and create jobs. The UK is facing a post-COVID-19 jobs crisis, and jobs in traditional industries like steel are also under threat from automation and the transition to net zero. Investing in lower carbon manufacture and use of steel can help revive the UK’s strategically important steel industry and protect and upskill existing jobs in steelmaking areas. Measures to encourage efficient use and reuse of steel in the construction sector and other downstream uses would create new areas of expertise for UK workers, generate new jobs and improve productivity.
● Decarbonising steel will help get the UK on track to net zero. Rapid reduction of emissions from UK steelmaking is a relatively easy win for the Government. A clear net zero plan for the sector would show the way for other industrial sectors. The UK can kick start its climate change ambitions by investing in hydrogen steelmaking, alongside reducing demand for steel where possible and maximising reuse and recycling. This can also help anchor and drive growth in the UK’s burgeoning hydrogen industry at a critical time, creating new markets and lowering costs.
In addition, this plan for clean steel will:
● Help level up Britain: Clean steel can level up left-behind areas. Investing in the infrastructure to make low-carbon steel can help level up regions in need of investment, such as Port Talbot and Scunthorpe. Average wages in the steel sector are 28 percent higher than the national average and a massive 46 above the regional average.11 These places have a rich industrial history but their high-skilled jobs are now in need of future proofing as we develop the industries of tomorrow.
11 Make UK, ‘A new deal for steel’, December 2019.
● Advance global Britain: Britain could be a leader in clean steel manufacture and expertise. Investing in hydrogen steelmaking alongside a clear transition plan for the whole sector would modernise UK steelmaking making it fit for the 21st century. Few other industries have made as big a mark on world history as UK steel, and the country should capitalise on its expertise in high specification steels to build new markets at home and abroad for high quality, near zero carbon steel.
Annex I: Who we are
The clean steel campaign is run by Green Alliance.
Green Alliance is an independent think tank and charity focused on ambitious leadership for the environment. Since 1979, we have been working with the most influential leaders in business, NGOs and politics to accelerate political action and create transformative policy for a green and prosperous UK.
Annex II: Clean steel in the news
Calls for and analyses showing the need for clean and recycled steel are growing across the media, showing the global appetite for clean steel but also adding to the urgency for a pan for it in the UK.
In the first couple of months of 2021, UK-focussed coverage has intensified. The Times12 printed an op-ed from MPs Holly Mumby-Croft and Jessica Morden calling for more support to help UK steel go green. The Mirror13 covered think tank Common Wealth’s report calling for clean steel, and iNews14 had an opinion piece from a UK steelworker on the need for a plan for clean steel in the UK. British Steel CEO Ron Deelan has also called15 for Government guidance on how to invest in the UK steel industry’s future.
Looking globally, The Financial Times16 published articles on escalating efforts in Europe to produce clean steel with hydrogen. It also released a feature17 on the global race for clean steel, highlighting the future need for primary steel. The Yorkshire Post18 reported that Liberty Steel is taking the first steps to building a hydrogen-powered steel plant in France. POLITICO19 has reported on the global race too, and how Asian steelmakers are joining it too. And reports from the Guardian20 show a buzz for clean steel in Australia.
Against the backdrop of COP26 and the Government’s net zero push, a great deal of noise is being made on and around clean steel. Now is the time for the UK to join the race and benefit from the innovation, jobs and exports it will bring.
(April 2021)
12 The Times, ‘British steel needs support to rebuild our country’, 05/02/2021.
13 The Mirror, ‘Pump cash into steel industry to boost climate change fight, Government urged’, 17/02/2021.
14 iNews, ‘I’m a steel worker – and know investing in British steel is best for our economy and planet’, 24/02/2021.
15 The Telegraph, ‘British Steel's Ron Deelen: 'We would like to start spending big money'’, 15/02/2021.
16 Financial Times, ‘Europe leads the way in the ‘greening’ of steel output’, 11/11/2020; ‘Financial Times, ‘Europe’s steel industry needs a credible plan to go green’, 06/08/2020.
17 Financial Times, ‘‘Green steel’: the race to clean up one of the world’s dirtiest industries’, 15/02/2021.
18 The Yorkshire Post ‘Liberty Steel to work on giant hydrogen steel plant in France’, 22/02/2021.
19 POLITICO, ‘EU steelmakers under pressure as global green steel race accelerates’, 02/02/2021.
20 Guardian, ‘'Enormous opportunity': how Australia could become the Saudi Arabia of renewable energy’, 26/08/2020; Guardian, ‘Green giants: the massive projects that could make Australia a clean energy superpower’, 13/11/2020.