European policymakers need to increase circularity and accelerate the switch to renewable energy to secure the future of a low-carbon steel sector, according to a new policy briefing for institutional investors. Produced by the Institutional Investors Group on Climate Change (IIGCC), the report said policy can support the net zero transition of the European steel industry by improving circularity in the value chain, providing low-cost clean power capabilities that account for the sector’s capital intensity, stimulating demand for green steel, and managing its impact on workers and communities. Recommendations specific to circularity include incentivising the capital investment needed to adopt electric arc furnaces, further reducing contamination risks to recycled steel, removing barriers and disincentives to greater use of recycled steel, and aligning with efforts to develop an international market for recycled steel. The steel industry is responsible for 7-9% of global CO2 emissions and around 5% in Europe. The region accounts for around 11% of all crude steel production, behind China which has more than half the global market. According to the IIGCC, investors view Europe as well-placed to seize opportunities arising from the global transformation of the steel sector, due to its generally high-end production capabilities. The report and its recommendations are intended to support institutional investors’ macro-stewardship activities, direct engagement with policymakers, and engagement with companies in the steel sector and its value chain. “While the EU has made good progress on headline climate commitments and targets, ultimately these can only be met if there’s action on the ground in the real economy,” said Edward Baker, Net Zero Manager at UK pension scheme LGPS Central. “This requires clear sector-by-sector policies, with steel one of the most important due to the industry’s emissions profile and its strategic importance for the green transition.”
