Abstract
Climate change is one of the most serious threats to the human habitat. The required structural change to limit anthropogenic forcing is expected to fundamentally change daily social and economic life. The production of iron and steel is a special case of economic activities since it is not only associated with combustion but particularly with process emissions of greenhouse gases which have to be dealt with likewise. Traditional mitigation options of the sector like efficiency measures, substitution with less emission-intensive materials, or scrap-based production are bounded and thus insufficient for rapid decarbonization necessary for complying with long-term climate policy targets. Iron and steel products are basic materials at the core of modern socio-economic systems, additionally being essential also for other mitigation options like hydro and wind power. Therefore, a system-wide assessment of recent technological developments enabling almost complete decarbonization of the sector is substantially relevant. Deploying a recursive-dynamic multi-region multi-sector computable general equilibrium approach, we investigate switches from coke-to hydrogen-based iron and steel technologies in a scenario framework where industry decisions (technological choice and timing) and climate policies are misaligned. Overall, we find that the costs of industry transition are moderate, but still ones that may represent a barrier for implementation because the generation deciding on low-carbon technologies and bearing (macro)economic costs might not be the generation benefitting from it. Our macroeconomic assessment further indicates that anticipated bottom-up estimates of required additional domestic renewable electricity tend to be overestimated. Relative price changes in the economy induce electricity substitution effects and trigger increased electricity imports. Sectoral carbon leakage is an imminent risk and calls for aligned course of action of private and public actors.
Highlights
Highlights : Economy-wide effects of switching to low carbon steel production can be positive Unemployment can be decreased by switching to low carbon steel production Macro-effects depend on technology choice, trade specialization & energy policy Climate policy and aligned industry timing can moderate potential macro lossesKeywords: Iron and Steel, Process Emissions, Mitigation, computable general equilibrium (CGE) JEL classification: Q54, D58, O3, L61
Results are given relative to a baseline model run where conventional iron and steel production persists by means of blast furnace (BF)-BOFs which is confronted with the same CO2 price trajectory
The underlying CO2 price trajectory is insufficient to close the gap between conventional and ‘high-cost’ technologies, especially since the latter is affected by additional burdens regarding financing of new facilities. This changes when using a ‘lowcost’ technology specification where the CO2 price trajectory leads to lower market prices for iron and steel relative to the baseline case. Note that in both techno-economic specifications, the strongest implications are in AUT and the weakest in GRC, pointing to the fact that the share of phased-out blastfurnace basic-oxygen furnace (BF-BOF) iron and steel production is highest for the former and negligible for the latter region
Summary
Deep decarbonisation of socio-economic systems requires substantial reductions of greenhouse gas (GHG) emissions resulting from (i) the incineration of coal, oil and gas (combustion-based or energetic emissions), (ii) agricultural activities (cultivation of crops and livestock) and forestry, and (iii) industrial processes (process emissions). Deep decarbonisation of industrial processes like iron and steel production (mainly resulting from oxygen reduction in iron ores) has been analysed mostly in combination with ‘end-of-pipe silver bullet’ technologies like carbon capture and storage (CCS, cf Rootzen and Johnsson, 2015). To comply with the 2◦C target, more radical than incremental changes are required with respect to currently process-emission-intensive iron and steel production
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
