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1、OCTOBER 2024Forging a Post-Carbon IndustryInsights from AsiaInstitut Montaigne is a leading independent think tank based in Paris.Our pragmatic research and ideas aim to help governments,industry and societies to adapt to our complex world.Institut Montaignes publications and events focus on major e

2、conomic,societal,technological,environmental and geopolitical changes.We aim to serve the public interest through instructive analysis on French and European public policies and by providing an open and safe space for rigorous policy debate.3FORGING A POST-CARBON INDUSTRYINSIGHTS FROM ASIAREPORT-Oct

3、ober 2024Forging a Post-Carbon IndustryInsights from AsiaExplainerTo understand the world in which we operateReportDeep-dive analyses and long-term policy solutionsIssue PaperTo break down the key challenges facing societiesExclusive InsightsUnique data-driven analyses and practical scenario exercis

4、esPolicy PaperTo provide practical recommenda-tionsInstitut Montaignes reports are comprehensive analyses that result from collective reflection.They aim to put forward long-term solutions to todays most pressing public policy challenges.5FORGING A POST-CARBON INDUSTRYINSIGHTS FROM ASIAPart 2Strateg

5、ies to decarbonize the Steel and Aluminum Sectors 6AuthorJoseph DellatteDr.Joseph Dellatte joined Institut Montaignes Asia Program in 2022 as Research Fellow for Climate,Energy,and Environment.He is also a Research Associate at Kyoto University(Japan)and a member of the Japanese Research Group on Re

6、newable Energy Economics.He specializes in international climate policy and global climate governance,focusing on carbon pricing,industry decarbonization policy,transition finance and Asia-Europe relations on climate.7Table of contentsIntroduction .9Comparative Sectoral Strategies to decarbonize ind

7、ustry .111.Strategies for Decarbonize the Steel Sector .11a.Chinas Steel Sector Strategy .14b.Japans Steel Sector Strategy .26c.South Koreas Steel Sector Strategy .31d.The European Steel Strategy .35e.Electrifying the Steel Sector .45f.Electrification in China .45g.Electrification in Japan .48h.Elec

8、trification in South Korea .50i.Electrifying the European Steel Sector .53j.Producing Primary Steel Using Clean Hydrogen .56k.China and Hydrogen Steelmaking .59l.Japan and Hydrogen Steelmaking .63m.South Korea and Hydrogen Steelmaking .66n.The Impact of Technology Uncertainty .71o.The Fundamental Ch

9、allenges in Designing an Efficient Steel Decarbonization Policy .76p.Key Comparative Insights .82q.Summary of Recommendations for the Steel Sector in Europe .96INSTITUT MONTAIGNE82.Strategies to Decarbonize the Aluminum Sector .98a.The Current State of the Aluminum Sector .98b.Aluminum Production an

10、d Process .99c.Decarbonizing the primary aluminum processes .102d.Decarbonization Strategies for Secondary Aluminum .103e.Decarbonizing a Highly Geopolitical Sector .106f.Chinas Strategy for Aluminum .107g.Japan and Aluminum decarbonization .117h.Korea and aluminum decarbonization .125i.The European

11、 Strategy for Aluminum .132j.The key challenges emerging from the EU CBAM in the Aluminum Sector .144k.Policy Recommendations for a European Industrial Strategy to decarbonize the aluminum sector .149Appendix .152List of All Interviewees and Stakeholders Consulted .160Acknowledgments .1699In the fac

12、e of the climate crisis,as the world moves rapidly toward the dan-gerous threshold of+2C warming,decarbonizing industries has become an urgent priority.As the second part of the Institut Montaignes research report on Industrial Decarbonization Policies and Strategies in Europe and Asia,this paper ex

13、amines critical issues surrounding the decarbo-nization of two essential sectors:steel and aluminum.These industries are central to global economic activity but also contribute significantly to greenhouse gas emissions.The dual challenge of reducing emissions while maintaining industrial competitive

14、ness forms the crux of the ana-lysis in this report.The first part of this report provides an extensive exploration of decar-bonization policies and strategies in Europe,China,Japan,and South Korea.It addresses fundamental questions such as defining clean indus-trial policy and global decarbonizatio

15、n strategies and offers comparative insights into Europe and Asias approaches.The focus of Part 1 is on iden-tifying the necessary technical solutions and policy frameworks to enable a shift to greener production methods.In this second part,the emphasis shifts to a more granular examina-tion of the

16、steel and aluminum sectors.Both sectors are indispensable for the post-carbon economy,with steel required for renewable energy infrastructure and aluminum crucial for lightweight transportation solu-tions.The report undertakes a comparative analysis of the strategies pursued by Europe,China,Japan,an

17、d South Korea to decarbonize these industries,highlighting the policy choices,technological advancements,and economic conditions shaping each regions approach.Specifically,this section assesses technological pathways such as electri-fication,hydrogen-based steel production,and recycling of secondary

18、 aluminum and evaluates the financial and policy support mechanisms IntroductionINSTITUT MONTAIGNE10that will drive their deployment.With Europe on the cusp of implemen-ting more aggressive climate policies through instruments such as the removal of free allocation from the EU Emissions Trading Sche

19、me(ETS),the Carbon Border Adjustment Mechanism(CBAM),and the Net-Zero Industry Act,it is vital to understand the competitive dynamics between green and carbon-intensive goods and their impact on decision-making for decarbonization.Finally,this report provides recommendations tai-lored to the Europea

20、n context and is intended to ensure that the steel and aluminum industries can decarbonize without compromising their role in future economic prosperity.11FORGING A POST-CARBON INDUSTRYINSIGHTS FROM ASIAComparative Sectoral Strategies to Decarbonize Industry1.STRATEGIES FOR DECARBONIZING THE STEEL S

21、ECTORThe steel industrys transition is essential for meeting climate goals,and despite the inherent challenges,it is technologically achievable with the right policies in place.In fact,while“green”or“low-carbon”steel might not be entirely zero-carbon due to some very hard-to-abate emissions in the p

22、rocess,options have been examined that offer significant reduc-tions in emissions of up to 95percent while the remaining emis-sions are abatable using carbon capture technologies.There are two types of steel.Primary steel is produced from iron ore through various processes,while secondary steel is r

23、ecycled from scrap metal.Steel is produced by two main routes:the blast furnacebasic oxygen furnace(BFBOF)route and the electric arc furnace(EAF)route.The BFBOF route primarily uses iron ore and coke as raw materials to produce primary steel,1 and the EAF route mainly recycles scrap steel 2 to produ

24、ce secondary steel.Additionally,among the technologies that will be key in decarbonizing the steel sector,direct reduced iron(DRI),currently fossil-based and reliant on natural gas,already contributes approximately 7percent to global crude steel production.3 In 2022,71.5percent of global crude 1 It

25、is also worth noting that the BFBOF route typically incorporates around 20 percent scrap in its production process.2 However,virgin pig iron or hot briquetted iron(HBI)are frequently utilized in the mix to achieve the desired product quality.3 Midrex Technologies,Inc.,“2022 World Direct Reduction St

26、atistics,”2023,https:/ MONTAIGNE12steel production,totaling 1.34billion tons,used the BFBOF route,while 28.2percent came from the EAF route powered by electricity.4Overall,the steel industrys decarbonization strategies involve a mix of advanced technologies and bold initiatives,often using untested

27、methods.While these approaches hold great promise for reducing car-bon emissions,they are accompanied by significant technological and financial uncertainties.The transition to low-carbon steel production presents significant challenges.The high cost of renewable hydrogen and the need for substantia

28、l investments in new infrastructure,inclu-ding renewable energy and hydrogen supply chains,pose financial and logistic hurdles.Producing low-carbon steel is currently estimated to be 35100percent more expensive than traditional methods,but it is expected to become competitive as technologies mature

29、and economies of scale are achieved.54 International Energy Agency,“Global Crude Steel Production by Process Route and Scenario(20192050)”October 5,2020,https:/www.iea.org/data-and-statistics/charts/global-crude-steel-production-by-process-route-and-scenario-2019-2050.5 Eurometal,“EU Steel Industrys

30、 60 Decarbonization Projects Could Cut Emissions by a Third,”June2,2022,https:/ A POST-CARBON INDUSTRYINSIGHTS FROM ASIAFigure 1:Proportion of operating steel capacity by technology type in the top 10 steel producersCoal-based blast furnace-basic oxygen furnace(BF-BOF)methodDirect reduced iron-elect

31、ric arc furnace(DRI-EAF)methodLower emissions electric arc furnace(EAF)method0204060Percentage of operating steel capacity(%)Production of operating steel capacity by technology type in top ten steel producers.How to reed this chart:%of operating steel capacity by techologogy type.height of bars=tot

32、al operating steel capacity in thousand tonnes per year(ttpa).Source:Global Steel Plant Tracker,Global Energy Monitor801000 ttpa500 ttpa1,000 ttpa1,500 ttpaIranBrazilGermanyTrkiyeSouth KoreaRussiaIndiaUnited StatesJapanChinaINSTITUT MONTAIGNE14a.Chinas Steel Sector StrategyChina is by far the worlds

33、 largest steel producer,with massive primary steel production via coal-based blast furnaces,nearing 913million tons per annum(mtpa)in operation and with an additional 97mtpa under development.6 This substantial coal-based production is incompatible with the countrys carbon neutrality goals for 2060,

34、as well as with the projected domestic steel demand,indicating significant overcapacity.Currently,China exports 6percent of its steel,and this figure is expected to grow in the future due to weak domestic demand,7 even if the Chinese government theoretically aims to keep primary steel in the domesti

35、c market.8 The steel sector represents around 15percent of Chinas greenhouse gas(GHG)emissions.9Dealing with Overcapacity as the Main AnswerChinas first priority in reducing emissions in its steel sector is to reduce overcapacity.The difficulties in addressing the overcapacity issue in the steel sec

36、tor are largely due to the nature of Chinas industrial policy,as although the bodies that set policy at the national level the National Development and Reform Commission(NDRC),Ministry of Industry and 6 Global Energy Monitor,“Global Steel Plant Tracker,”accessed September 9,2024,https:/globalenergym

37、onitor.org/projects/global-steel-plant-tracker/.7 Ali Hasanbeigi,Hongyou Lu,and Nan Zhou,“Net-Zero Roadmap for Chinas Steel Industry,”Global Efficiency Intelligence&Berkeley Lab,March 2023,https:/eta-publications.lbl.gov/sites/default/files/china_steel_roadmap-2mar2023.pdf.8 取消鋼鐵產品出口退稅有何深意？影響幾何？What

38、 Is the Deeper Significance of Canceling Export Tax Rebates on Steel Products?What Are the Impacts?,Csteelnews,August 2,2021,http:/ 鋼鐵業推進綠色低碳轉型 Steel Industry Promotes Green and Low-Carbon Transition,Economic Daily News,July 13,2023,http:/ A POST-CARBON INDUSTRYINSIGHTS FROM ASIAInformation Technolo

39、gy(MIIT),and the Ministry of Ecology and the Envi-ronment(MEE)aim to reduce overcapacity,the implementation of industrial policies is the responsibility of certain provinces that may be reluctant to shut down plants due to the potential negative impact on economic growth.Consequently,until very rece

40、ntly,investments in coal-based blast fur-nace(BF)plants continued,despite policies aimed at reducing capacity and decarbonizing the sector.This schizophrenic situation of maintai-ning overcapacity while pursuing decarbonization goals risks creating stranded assets if polluting assets are not increme

41、ntally phased out.If China is serious about its carbon neutrality objectives,these stranded assets could theoretically amount to up to RMB 1.92 trillion(approxi-mately 244billion)by 2050.10Chinas tentative response to the overcapacity problem is long-standing and has been driven not so much by decar

42、bonization but by the econo-mic risks associated with the decommissioning and proliferation of small assets.National initiatives,originating from the 1+N targets for the indus-try,11 explicitly aim to reduce emissions by addressing overcapacity in the steel sector.These initiatives seek to reform th

43、e steel supply to better align with Chinas economic needs and facilitate the shift toward low-carbon industries.However,it is important to note that in China,the definition of“low carbon”also includes the use of“coal in a cleaner man-ner.”10 “BFBOF projects approved in 20212023 alone will face the r

44、isk of ending up as stranded assets worth USD 118 billion.If BFBOF projects approved in 20172020 are included,the risk of stranded assets comes to USD 270 billion.”:Xinyi Shen,“Steel Sector Decarbonisation in China Stalls,with Investments in Coal-Based Steel Plants since 2021 Exceeding USD 100 Billi

45、on Despite Overcapacity and Climate Goal,”Centre for Research on Energy and Clean Air,March 2024,https:/energyandcleanair.org/wp/wp-content/uploads/2024/03/CREA_2023H2-China-steel-analysis.pdf.11 National Development and Reform Commission,China,“Action Plan for Carbon Dioxide Peaking before 2030,”Oc

46、tober 27,2021,https:/ MONTAIGNE16The“Guidance Catalogue for Industrial Restructuring(2024)”12 outlines the governments clear strategy of concentrating the industry and promo-ting the development of larger production facilities rather than multi-plying smaller ones.By employing a“capacity-replacement

47、 strategy,”this plan seeks to reduce the number of small production facilities.By defining what is permitted,restricted,and prohibited,the plan aims to increase cen-tral and provincial government control over the productive apparatus to restructure it as desired.However,despite the existence of this

48、 plan and various other central government policies,“illegal constructions,”parti-cularly in steel-dependent provinces such as Guangxi,remain persistent.13In addition,between 2017 and 2023,provincial governments in China approved numerous new iron and steelmaking projects through capa-city swap plan

49、s,which require retiring larger amounts of existing capacity and building new capacity to ensure a net reduction or stabilization in total production.These plans also aim to increase efficiency and reduce emissions per unit of production.14 However,many of the new projects approved are set to utiliz

50、e outdated BF technology,which relies heavily on coal,rather than adopting cleaner methods such as electric arc furnaces(EAFs).Recent analyses indicate that no new coal-based steel or cement plants were approved in China during the first six months of 2024 15 and recently,the central government anno

51、unced a“pause”on all new steel pro-jects,halting the issuance of permits for future developments,including for EAFs.16 The long-term stability of this decision remains uncertain,but 12 National Development and Reform Commission,China,產業結構調整指導目錄(2024年本)Guiding Catalogue for Industrial Structure Adjus

52、tment(2024 Edition),December 29,2023,https:/ Shen,“Steel Sector Decarbonisation in China Stalls.”14 For more on this,see:Jonas Algers and Max hman,“Phase-In and Phase-Out Policies in the Global Steel Transition,”Climate Policy(2024):114.https:/doi.org/10.1080/14693062.2024.2353127.15 Xinyi Shen and

53、Belinda Schpe,“Turning Point:China Permitted No New Coal-Based Steel Projects in H1 2024 as Policies Drive Decarbonisation,”Centre for Research on Energy and Clean Air,July 2024,https:/energyandcleanair.org/publication/turning-point-china-permitted-no-new-coal-based-steel-projects-in-h1-2024-as-poli

54、cies-drive-decarbonisation/.17FORGING A POST-CARBON INDUSTRYINSIGHTS FROM ASIAit logically reflects the significant decline in the countrys infrastructure and construction demand.The future expansion of Chinas steel capacity remains uncertain.By 2025,capacity-replacement projects are expected to ren

55、ew about one-third of Chinas steelmaking capacity,further increasing the risk of stranded assets in the sector.Beyond decarbonization objectives,the primary factor influencing the future of the steel industry in China and thus decarbonization and electrification will be the sustainability of this de

56、cline in the demand for primary steel.The Governments Role in Guiding the SectorBeyond dealing with overcapacity,national policies also aim to develop so-called green production chains.The strategy at the national and pro-vincial levels is increasingly to mitigate emissions from conventional coal-ba

57、sed blast furnaces that cannot be phased out quickly enough and replaced by carbon-neutral processes,primarily through carbon capture,utilization,and storage(CCUS)technologies.This is visible in the guidance concerning steel sector restructuring provided by the NDRC,17 MIIT,18 and MEE.1916 Ministry

58、of Industry and Information Technology of the Peoples Republic of China,工業和信息化部辦公廳關于暫停鋼鐵產能置換工作的通知 Notice of the General Office of the Ministry of Industry and Information Technology on Suspending Steel Capacity Replacement Work,August 20,2024,https:/ 鍛長板補短板 持續增強鋼鐵行業核心競爭力 Strengthening Advantages and

59、 Addressing Weaknesses to Continuously Enhance the Core Competitiveness of the Steel Industry,Csteelnews,January 31,2024,http:/ Ministry of Industry and Information Technology,China,關于政協十三屆全國委員會一次會議第2236號（工交郵電類161號）提案答復的函 Reply to Proposal No.2236(Industry,Transport,and Telecommunications No.161)of

60、the First Session of the 13th National Committee of the Chinese Peoples Political Consultative Conference,September 17,2008,https:/ Ministry of Ecology and Environment,China,關于推進實施鋼鐵行業超低排放的意見 Opinions on Promoting the Implementation of Ultra-Low Emissions in the Steel Industry,April 28,2019,https:/

61、MONTAIGNE18Notably,the“14th Five-Year Plan for Raw Materials”(2021)20 and the“Steel Industry Development Guidelines,”21 two key documents for the indus-trys decarbonization,do not set specific emissions reduction targets for steel up to 2025.However,recent rules set annual carbon inten-sity reductio

62、n targets in the industrial sectors for each steel route:1percent for blast furnaces and 2percent for EAF.22Overall,there is considerable instability in the sectors decarbonization goals.For example,the China Iron and Steel Association(CSA),a government-linked agency,initially set goals in 2021 to p

63、eak steel emis-sions by 2025 and reduce emissions by 30percent by 2030.However,in 2022,the association revised these targets to a less ambitious peak emissions timeframe between 2025 and 2030.23Provinces with high levels of steel production,such as Hebei,Jiangsu,and Shandong,all have plans to develo

64、p low-carbon steelmaking,although these plans focus more on improving current production chains than on achieving carbon neutrality.24 There is an overall disparate alignment 20 Ministry of Industry and Information Technology,China,三部委關于印發“十四五”原材料工業發展規劃的通知 Notice from Three Ministries on Issuing the

65、 14th Five-Year Development Plan for the Raw Materials Industry,December 29,2021,https:/ State Council of the Peoples Republic of China,三部委關于促進鋼鐵工業高質量發展的指導意見 Guiding Opinions from Three Ministries on Promoting High-Quality Development of the Steel Industry,January 20,2022,https:/ State Council of th

66、e Peoples Republic of China,國家發展改革委有關負責同志就鋼鐵、煉油、合成氨、水泥4個行業節能降碳專項行動計劃答記者問 National Development and Reform Commission Officials Answer Questions on the Special Action Plans for Energy Conservation and Carbon Reduction in the Steel,Refining,Synthetic Ammonia,and Cement Industries,June 8,2024,https:/ 中共

67、中央 國務院關于完整準確全面貫徹新發展理念 做好碳達峰碳中和工作的意見 Opinions from the Central Committee of the Communist Party of China and the State Council on Fully and Accurately Implementing the New Development Philosophy to Achieve Carbon Peak and Carbon Neutrality,China Central Television(CCTV),October 24,2021,https:/ Enviro

68、nmental Defense Fund,“Chinas Policies and Actions on Carbon Peaking and Carbon Neutrality,”2023,http:/www.prcee.org/yjcg/yjbg/202403/W020240313623895148361.pdf.19FORGING A POST-CARBON INDUSTRYINSIGHTS FROM ASIAbetween national and local objectives.Most provincial governments prioritize maximizing em

69、ployment,income,and growth over closing steel mills and reducing emissions.One of the central governments goals is to create national champions in major industries,especially steel.This involves consolidating state-owned enterprises(SOEs)and absorbing some private entities to enhance control and ben

70、efit from economies of scale.The goal is to place 60percent of steel production in the hands of the top 10 producers,up from the current 40percent.This means concentrating more of this production in the hands of SOEs,since 60percent of current production is privately owned.25Interestingly,most major

71、 players in Chinas steel industry have more ambitious goals than those officially implemented by the central govern-ment.Echoing this,at COP28,Li Jiang,a member of Chinas State Council,announced that all state-owned steel enterprises must have a carbon emissions limitation plan,answering to the gove

72、rnments willingness to address this issue and illustrating the strategy of taking back control over the production engine.25 Shen,“Steel Sector Decarbonisation in China Stalls.”INSTITUT MONTAIGNE20A Cooperative and Technology-Agnostic R&D ApproachMIITs“Guidance on Promoting High-Quality Development

73、of the Steel Industry”27 provided key guidance defining industrial policy concerning steel in China and established the Low-Carbon Metallurgy Innovation Alliance.This alliance is designed to enhance collaborative efforts to develop low-carbon technologies across the steel industry by uniting R&D eff

74、orts from various stakeholders,including industry,academia,and government entities.The alliance aims to foster innovation,facili-tate the exchange of knowledge,standardize new low-carbon processes,CompanyProduction Volume(million tons)OwnershipChina Baowu Steel Group131.84SOEHBIS Group43.76SOEAnstee

75、l Group55.65SOEJiangsu Group41.45PrivateShougang Group33.83SOEShandong Iron and Steel Group30.0SOEBeijing Jianlong Heavy Industry Group28.67PrivateTianjin Iron and Steel Group27.0SOEHunan Valin Steel Co.,Ltd26.48PrivateXinyu Iron and Steel Co.,Ltd23.91PrivateTable 1:Top Chinese Steelmakers by Produc

76、tion Volume2626 Table by the author,based on World Steel Association,“2023:World Steel in Figures,”May 18,2023,https:/worldsteel.org/wp-content/uploads/World-Steel-in-Figures-2023.pdf.27 State Council of the Peoples Republic of China,“Guiding Opinions on Promoting High-Quality Development of the Ste

77、el Industry.”21FORGING A POST-CARBON INDUSTRYINSIGHTS FROM ASIAand accelerate the implementation of these technologies in industrial applications.This collaborative approach is intended to streamline the transition to greener steel production methods by adopting a techno-logy-agnostic approach,notab

78、ly using hydrogen,CCUS,and EAFs.Chinas approach to decarbonization in its industrial policy,particularly in the steel sector,could be characterized more as catch-up R&D than pioneering primary R&D.However,this perspective is both accurate and misleading.Private steelmaking companies in China are enc

79、ouraged to innovate not only with respect to decarbonization but also to improve efficiency and capture market share.In contrast,SOEs have been incen-tivized to scale up production to meet the substantial domestic demand for steel at least until the recent real estate crisis.SOEs are,however,also en

80、couraged to promote innovation in the steel sector,and the govern-ment encourages increasing the intensity of industry R&D to about 1.5percent of the total output value.28China is already demonstrating hydrogen-based steel production and has been operating a full-scale“hydrogen-ready”DRI since early

81、 2024.29 It also has several R&D initiatives focused on the steel sec-tor.Nevertheless,the country closely monitors global competitors and market trends to absorb new technological innovations from abroad,particularly those suitable for the Chinese steel industry.Chinese guidelines for the steel sec

82、tor promote almost any technology with the potential to decarbonize,reduce emissions,or improve energy efficiency.There are no significant restrictions on which directions to 28 Ministry of Industry and Information Technology,China,三部門關于促進鋼鐵工業高質量發展的指導意見 Guiding Opinions from Three Departments on Pro

83、moting High-Quality Development of the Steel Industry,February 7,2022,https:/ Danieli Group,“New Energiron DRI Plant Starts Production at Baowu,”January 17,2024,https:/ MONTAIGNE22pursue as long as they contribute to a more integrated,energy-efficient,and carbon-neutral sector by 2060 10 years later

84、 than other major competitor nations.This approach allows the Chinese steel sector to rapidly adopt technology when the timing is optimal,seeking to gain a second-mover advantage.Overcapacity in the sector also aids decarbo-nization efforts,as it may facilitate reducing absolute emissions through po

85、tential decommissioning while allowing for a more gradual decrease in energy intensity.The Example of BaowuBaowu,the leading player in Chinas steel industry,is at the fore-front of initiatives aimed at decarbonization,positioning itself as the industry leader in this area within China.It also demons

86、trates the integrated innovation approach that is emerging in the Chinese industrial decarbonization strategy,which focuses on big SOE actors such as Baowu.The company has developed a comprehensive carbon neutrality technology roadmap,30 which encompasses nearly all available decarbonization technol

87、ogies.This roadmap includes electri-fication using clean energy,hydrogen reduction processes,and CCUS.In its decarbonization plan,Baowu also advocates for standards for low-carbon steel to support the significant investments it plans to undertake.31 The company stresses that the technological mix ne

88、cessary to achieve decarbonization,30 Baowu Group,專題解讀|碳中和冶金路線圖和零碳工廠 Thematic Interpretation|Carbon Neutrality Metallurgy Roadmap and Zero-Carbon Factory,December 2,2021,https:/ A recent proposal for a standard on low-carbon steel was recently published by the China Iron and Steel Association with i

89、nputs from BAOWU.23FORGING A POST-CARBON INDUSTRYINSIGHTS FROM ASIAinvolving electrification,CCUS,and hydrogen,requires coordi-nated action across the entire steel value chain.To this end,Baowu has launched a Low Carbon Alliance 32 under the gui-dance and support of MIIT to integrate these efforts i

90、nto its value chain.Baowu therefore partners with numerous companies,leveraging a broad range of technologies including energy storage,which is crucial for producing the renewable hydrogen necessary for steel manufacturing through the H2-DRI process.33 Baowus 12-point strategy progresses from small

91、prototypes to larger ones and moves to the demonstration phase before advancing to commercialization and integration into the companys value chain.To fund these initiatives,Baowu has established a RMB 54.8billion(approximately 7billion)fund targeting clean energy and green technology projects,aimed

92、at achieving its carbon neutrality goals by 2050.This plan is supported by the Industry Innovation Fund established by the Chinese government.Addi-tionally,Baowus strategy targets cross-sectoral cooperation with diverse industries such as petrochemicals and energy production,encompassing both hydrog

93、en and renewable elec-tricity.This holistic approach underscores the centrality of R&D on decarbonization strategies by SOEs such as Baowu in Chinas broader industrial decarbonization strategy.32 Baowu Group,“Conference:To Reshape the Key Role of the Steel Industry in the Sustainable Development of

94、Mankind,”2021,https:/ Rio Tinto,“China Baowu and Rio Tinto Extend Climate Partnership to Decarbonise the Steel Value Chain,”June 12,2023,https:/ MONTAIGNE24Responding to the EU Carbon Border Adjustment MechanismThe government announced that the Chinese national emissions tra-ding scheme(ETS)would be

95、 extended to the industrial sector,inclu-ding steel,from 2025.34 This would mark a new milestone,and this move aligns with the evolving international market,especially in light of the EUs CBAM.However,the intensity-based nature of the Chinese ETS is unlikely to change before 2030,and the actual trad

96、ing of allowances from the steel sector under the Chinese ETS may not happen for some years.Even if adjustments are made,the actual emissions reductions required from the sector remain undetermined and are unlikely to be burdensome com-pared to those of direct competitors,at least before 2030.This i

97、mplies that the Chinese steel sector will have more flexibility to observe and adapt to winning technologies during the transition period and gain the sought-after second-mover advantage.Chinas future steel production trends are difficult to predict.However,many reports analyzing Chinas steel sector

98、 converge on the view that the production peak is imminent,followed by a continuous decline until stabilization around 2050.The Rocky Mountain Institute 35 predicts around 621million tons of steel production in China by 2050,with a shift toward secondary steel production using EAF technology.However

99、,it is likely that Chinas steel sector will ultimately be a mix of electrifi-cation,clean hydrogen reduction,and extensive use of CCUS for the newest coal-based assets that will not be decommissioned.34 六五環境日|鋼鐵行業綠色低碳轉型成效明顯 專訪中國鋼鐵工業協會有關負責人 65th World Environment Day|Steel Industrys Green and Low-Car

100、bon Transition Shows Significant Results An Interview with Officials from the China Iron and Steel Industry Association,China Environment News,June 5,2024,http:/ Rocky Mountain Institute,加速工業深度脫碳：中國水泥行業碳中和之路 Accelerating Deep Industrial Decarbonization:The Path to Carbon Neutrality for Chinas Cement

101、 Industry,August 31,2022,https:/ A POST-CARBON INDUSTRYINSIGHTS FROM ASIANotably,most industry stakeholders view steel as a crucial factor in Chinas economic development and believe that while the steel sector should be controlled,any constraints placed on it must not interfere with Chinas pursuit o

102、f its development priorities.Therefore,there is a strong emphasis on guiding the sector toward CCUS,thus enabling carbon-in-tensive facilities to be kept in operation as long as possible.LegislationDateIssuerLinkGuidance Catalogue for Industrial Restructuring 362024National Development and Reform Co

103、mmission(NDRC)https:/ 14th Five-Year Plan for Raw Materials372021Ministry of Industry and Information Technology(MIIT)https:/ Industry Development Guidelines 382022MIIThttps:/ on Promoting High-Quality Development of the Steel Industry 392022MIIThttps:/ national Emissions Trading System(ETS)402021Mi

104、nistry of Environment and Ecology(MEE)https:/ Plan for Carbon Peaking in the Industrial Sector 412022MIIT/NDRChttps:/ 2:Chinese Policies for Decarbonizing the Steel Sector36 National Development and Reform Commission of the Peoples Republic of China,“Guiding Catalogue for Industrial Structure Adjust

105、ment(2024 Edition).”37 Ministry of Industry and Information Technology,China,“Notice from Three Ministries on Issuing the 14th Five-Year Development Plan for the Raw Materials Industry.”38 State Council of the Peoples Republic of China,“Guiding Opinions from Three Ministries on Promoting High-Qualit

106、y Development of the Steel Industry.”39 State Council of the Peoples Republic of China,“Guiding Opinions from Three Ministries on Promoting High-Quality Development of the Steel Industry.”40 鋼鐵行業綠色低碳轉型成效明顯 Significant Results in the Steel Industrys Green and Low-Carbon Transition,China Environment N

107、ews,June 5,2024,https:/ State Council of the Peoples Republic of China,工業領域碳達峰實施方案 Implementation Plan for Carbon Peaking in the Industrial Sector,August 2022,https:/ MONTAIGNE26b.Japans Steel Sector StrategyJapan is the third-largest steel producer globally,and the sector repre-sents about 14percen

108、t of total Japanese GHG emissions.46 The country has adopted a multifaceted strategy to decarbonize its steel industry as part of its broader goal of achieving carbon neutrality by 2050.42 Ministry of Industry and Information Technology of the Peoples Republic of China,十四五”工業綠色發展規劃 14th Five-Year Pl

109、an for Green Industrial Development,December 3,2021,https:/ National Development and Reform Commission,China,關于加強綠色電力證書與節能降碳政策銜接大力促進非化石能源消費的通知 Notice on Strengthening the Coordination of Green Power Certificates and Energy Conservation and Carbon Reduction Policies to Vigorously Promote Non-Fossil E

110、nergy Consumption,February 2,2024,https:/ National Development and Reform Commission,China,氫能產業發展中長期規劃（2021-2035 年）Medium-and Long-Term Plan for Hydrogen Energy Industry Development(20212035),March 23,2022,https:/ National Development and Reform Commission,China,工業和信息化部 國家發展和改革委員會 生態環境部關于促進鋼鐵工業高質量發展

111、的指導意見 Guiding Opinions from the Ministry of Industry and Information Technology,National Development and Reform Commission,and Ministry of Ecology and Environment on Promoting High-Quality Development of the Steel Industry,May 20,2022,https:/ Ministry of Economy,Trade and Industry,Japan,“Technology

112、Roadmap Formulated for Transition Finance toward Decarbonization in the Iron and Steel Sectors,”October 27,2021,https:/www.meti.go.jp/english/press/2021/1027_002.html.LegislationDateIssuerLinkGuidelines for the steel sector 422021MIIThttps:/ electricity consumption mandate 432024NDRChttps:/ Industry

113、 Development Mid-Long Term Plan(20212035)442022NDRChttps:/ Metallurgy Action Plan 452022NDRChttps:/ A POST-CARBON INDUSTRYINSIGHTS FROM ASIAThe challenges faced by Japan are significant due to its high depen-dence on primary steel production,the limited availability of scrap metal necessary for EAF

114、production,and the real difficulty of either producing clean hydrogen locally or importing it cheaply.The extent of these challenges calls into question the capacity of Japan to remain a major primary steel producer in a post-carbon world.Aware of these difficult challenges,the Japanese government,t

115、hrough various policies and funding mechanisms,has laid out comprehensive strategies to overcome these hurdles.The Basis of the StrategyJapans steel strategy supports four directions to decarbonize and lower GHG emissions in the steel industry.The strategy focuses heavily on hydrogen as a decarboniz

116、ation vector.The Green Growth Strategy,47 launched in December 2020,emphasizes the development of hydrogen reduction steelmaking technologies.Japan is also pushing for electrification particularly improving EAF processes to remove impurity,the adoption of DRIEAF processes,and a mix between CCUS and

117、hydrogen called carbon recycling BFs to complement its hydrogen strategy.CCUS technologies play a pivotal role in Japans current strategy to decarbonize the steel industry.The government has committed to sup-porting the development of these technologies to capture and utilize CO2 emissions from stee

118、l production processes.The Roadmap for Car-bon Recycling Technologies,48 launched in July 2021,outlines the plan 47 Ministry of Economy,Trade and Industry,Japan,“Green Growth Strategy through Achieving Carbon Neutrality in 2050,”June 18,2021,https:/www.meti.go.jp/english/policy/energy_environment/gl

119、obal_warming/ggs2050/pdf/ggs_full_en1013.pdf.INSTITUT MONTAIGNE28to commercialize CO2 utilization technologies by 2030 and expand them further by 2040.In terms of the timeline for the steel sector,this implies the following:The Technology Roadmap for Iron and Steel plans to begin imple-menting CO2 c

120、apture in regular blast furnaces before 2030.49 The implementation of carbon-neutral processes such as clean hydrogen DRI is not envisioned before 2040.Overall,major stakeholders in the Japanese steel industry do not expect new processes to be introduced before 2040,aligning with the timeline for re

121、placing most Japanese blast furnaces.The Regulatory and Financial FrameworkThe Japanese government has introduced several financial instruments and regulatory measures to support the steel industrys transition.The Green Innovation Fund,with an allocation of JPY 2 trillion(approxima-tely 12billion),i

122、s supporting projects to decarbonize the steel indus-try for a total of JPY 193.5billion(approximately 1.15billion)until 2030:50 JPY 14billion(approximately 88million)for on-site hydrogen direct reduction JPY 121billion(approximately 762million)for low-carbon tech 48 Ministry of Economy,Trade and In

123、dustry,Japan,“Roadmap for Carbon Recycling Technologies,”July 2021,https:/www.meti.go.jp/english/press/2021/pdf/0726_003a.pdf.49 Ministry of Economy,Trade and Industry,Japan,“Technology Roadmap for Transition Finance in Iron and Steel Sector,”October 2021,https:/www.meti.go.jp/policy/energy_environm

124、ent/global_warming/transition/transition_finance_technology_roadmap_iron_and_steel_eng.pdf.50 Ministry of Economy,Trade and Industry,Japan,基金事業 Green Innovation Fund Project,October 15,2021,https:/www.meti.go.jp/policy/energy_environment/global_warming/gifund/pdf/gif_09_randd.pdf.29FORGING A POST-CA

125、RBON INDUSTRYINSIGHTS FROM ASIAusing CO2 contained in external hydrogen and blast furnace exhaust gas JPY 34.5billion(approximately 217.4million)for hydrogen direct injection(in classic blast furnaces,not carbon neutral)+additional 10percent subsidy rate JPY 23.6billion(approximately 148.7million)to

126、 improve EAF by removing impuritiesThe GX Transition Bonds,part of the Green Transformation(GX)strategy,offer additional financial support for green projects,backed by a total publicprivate investment of JPY 150 trillion(approximately 945billion)over the next decade.51 Moreover,the Development Bank

127、of Japans GRIT Strategy aims to invest JPY 5.5 trillion(approximately 34.7billion)in green and innovative initiatives by 2026,including pro-jects in the steel sector.52A Cooperative R&D and Demonstration ApproachJapans policy emphasizes collaboration across industry,academia,and government to foster

128、 innovation in low-carbon steel production.This strategy aims to unify efforts to develop and standardize new low-car-bon processes and to enhance research,facilitate knowledge exchange,and accelerate the adoption of low-carbon steel technologies.Against this backdrop,COURSE50 and Super COURSE50,the

129、 flagship projects developed by NEDO and the main Japanese steel companies(NipponSteel,JFE Steel,and KobeSteel),include efforts to separate and 51 Ministry of Economy,Trade and Industry,Japan,知経済基礎知識GX何？Essential Economic Knowledge You Should Know What Is GX?,January 17,2023,https:/journal.meti.go.j

130、p/p/25136/.52 Development Bank of Japan,“Response to the TCFD Recommendations,”2022,https:/www.dbj.jp/en/pdf/CSR_disclo/2022/tcfd.pdf.INSTITUT MONTAIGNE30recover CO2 from blast furnaces,reduce emissions by 20percent through CO2 recycling and mineralization technologies,and use hydrogen injec-tion in

131、 blast furnaces.53 These projects,which represent the most concrete actions to decrease emissions in the steel sector in Japan to date,do not aim for carbon neutrality but rather to enable emissions reduction during the transition period using currently available technologies(i.e.,fossil-fuel-based

132、blast furnaces).53 Nippon Steel,日本製鉄株式會社 説明資料 Nippon Steel Corporation Presentation Materials,2022,https:/www.meti.go.jp/shingikai/sankoshin/green_innovation/energy_structure/pdf/010_06_00.pdf.54 Ministry of Economy,Trade and Industry,Japan,“Green Growth Strategy through Achieving Carbon Neutrality

133、in 2050.”55 Ministry of Economy,Trade and Industry,Japan,“Roadmap for Carbon Recycling Technologies.”56 Ministry of Economy,Trade and Industry,Japan,“Technology Roadmap for Transition Finance in Iron and Steel Sector.”57 Ministry of Economy,Trade and Industry,Japan,“Basic Hydrogen Strategy,”June 6,2

134、023,https:/www.meti.go.jp/shingikai/enecho/shoene_shinene/suiso_seisaku/pdf/20230606_5.pdf.LegislationDateIssuerLinkGreen Growth Strategy 542020Ministry of Economy,Trade and Industry(METI)https:/www.meti.go.jp/english/policy/energy_environment/global_warming/ggs2050/pdf/ggs_full_en1013.pdfRoadmap fo

135、r Carbon Recycling Technologies 552021METIhttps:/www.meti.go.jp/english/press/2021/pdf/0726_003a.pdfTechnology Roadmap for Iron and Steel 562021METIhttps:/www.meti.go.jp/policy/energy_environment/global_warming/transition/transition_finance_technology_roadmap_iron_and_steel_eng.pdfComprehensive Road

136、map for Hydrogen Reduction Steelmaking 572023METIhttps:/www.meti.go.jp/shingikai/enecho/shoene_shinene/suiso_seisaku/pdf/20230606_5.pdfTable 3:Summary:Japanese Policies 31FORGING A POST-CARBON INDUSTRYINSIGHTS FROM ASIAc.South Koreas Steel Sector StrategySouth Korea is a major player in the global s

137、teel industry,with large com-panies such as POSCO and Hyundai Steel contributing to its status as the worlds sixth-largest steel producer.The steel sector in South Korea is responsible for about 13percent of the nations GHG emissions.58South Koreas steel sector is also highly trade-oriented,producin

138、g approximately 70million tons of steel annually,with 30million tons destined for export.Of these exports,around 10percent are shipped to the EU,10percent to the US,10percent to China,and 20percent to ASEAN countries,with the remainder distributed globally.59 This broad export strategy exposes the s

139、ector to diverse market demands,from“green-friendly”customers in the EU to those prioritizing high-quality steel at competitive prices.This reality complicates the decarbonization strategy of South Korean players.As is the case for Japan,South Korean stakeholders may face difficult choices and poten

140、tially a complete shift in their production model in the post-carbon economy.Despite this reality,the South Korean government is still betting heavily on its steel sector and aims to become the third-largest steel producer in the future.60The Basis of the StrategySimilar to Japan and Europe,one of t

141、he primary challenges for South Korea in decarbonizing its steel sector is the high cost associated with transitio-ning to low-carbon technologies.The development and implementation 60 Government of South Korea,Steel Industry Development Strategy,Februa-ry 2023,https:/www.korea.kr/docViewer/skin/doc

142、.html?fn=6edabc4005c40af9225651251ae-2d12a&rs=/docViewer/result/2023.02/17/6edabc4005c40af9225651251ae2d12a.INSTITUT MONTAIGNE32of hydrogen-based steelmaking and wider adoption of electrification are the South Korean governments primary strategy.In addition,CCUS is also part of the South Korean gove

143、rnments agenda.In terms of the timeline,this has the following implications:The main industry players target large-scale deployment of CCUS from 2040 and of most other emissions reduction technologies from 2035.In the“Scenario Plan for 2050 Carbon Neutrality,”the government plans to fully replace bl

144、ast furnaces and converters with hydrogen reduction steelmaking by 2050.The government also aims to replace crude steel production with steel scrap electricity processes“when possible.”61However,despite these targets,the extent of government involvement in the deployment of these decarbonization tec

145、hnologies remains to be determined.From a technological perspective,South Korea faces limita-tions similar to those faced by its Asian counterparts.First,the country has limited access to scrap metal,which is necessary for EAF production.Moreover,South Korea currently has a low capacity for producin

146、g clean hydrogen domestically and thus relies heavily on imports,complicating the transition to hydrogen-based steelmaking.62The Support FrameworkTo support the financial needs of the steel industry during its transition,the South Korean government has essentially established an R&D funding 61 Gover

147、nment of South Korea,2050 2050 Carbon Neutrality Scenario Proposal,October 18,2021,https:/tips.energy.or.kr/uplolad/carbon/1_2050 -.pdf.62 Which triggers investment from big Korean steelmakers abroad:POSCO is investing in a full-scale hydrogen electrolyzer in Oman.See Global Energy Monitor,“POSCO Om

148、an Green Steel Project.”accessed September 9,2024,https:/www.gem.wiki/POSCO_Oman_green_steel_project.33FORGING A POST-CARBON INDUSTRYINSIGHTS FROM ASIAmechanism through the Carbon Neutral Industrial Core Technology Development Project(October 2022).This project,which selected 100 core domestic carbo

149、n-neutral technologies to invest in,is highly techno-logy-agnostic and remains modest in scope,dedicating KRW 209billion(140million)to the steel sector.63In response to the EUs CBAM,the South Korean government has partne-red with the countrys three main steel companies POSCO Holdings Inc.,Hyundai St

150、eel Co.,and Dongkuk Steel Mill Co.to promote investment and technology development aimed at achieving low-carbon steelma-king.This partnership has led to the establishment of a dedicated KRW 1.5 trillion(around 1billion)fund to advance decarbonized steel production.64The South Korean government has

151、also introduced various support mechanisms,including low-interest loans,subsidies,and tax rebates.However,these supports are primarily directed toward R&D,with no capital expenditure(CAPEX)or OPEX subsidies in the pipeline.The government is,however,considering the introduction of contracts for diffe

152、rence tailored for green hydrogen projects,which could provide a stable revenue stream and encourage private investment.Companies are also forming coalitions to support R&D in decarboni-zing the steel sector.In February 2021,a Low Carbon Process Research Group 65 was launched following a joint decla

153、ration by five of the largest 63 2050 Carbon Neutrality Commission,South Korea,Launch of Domestic Task Force for Carbon Regulation in the Steel Industry,January 11,2023,https:/www.2050cnc.go.kr/base/board/read?boardManagementNo=43&boardNo=1238&page=1&-searchCategory=&searchType=&searchWord=&menuLeve

154、l=2&menuNo=16.64 Igasnet,3 Aiming for Top 3 in Global Exports With Low-Carbon,High-Value-Added Steel,March 22,2023,http:/ ETNews,R&D 2000.Hyundai Steels R&D Investment in Eco-Friendly Steel Surpasses 200 Billion Won.Reaches Record High,March 2023,https:/ MONTAIGNE34domestic steel companies KG Steel,

155、SeAH Steel Holdings,POSCO,Dong-kuk Steel,and SIMPAC to achieve carbon neutrality.LegislationDateIssuerLinkScenario Plan for 2050 Carbon Neutrality 662021Government of South Koreahttps:/tips.energy.or.kr/uplolad/carbon/1_2050 -.pdfKorean Emissions Trading Scheme 672015Government of South Koreahttps:/

156、 Industrial Growth Strategy through Revitalization of Circular Economy 682023Ministry of Economy and Financehttps:/www.moef.go.kr/com/cmm/fms/FileDown.do;jsessionid=0.node20?atch-FileId=ATCH_000000000023349&fileSn=6Hydrogen Economy Roadmap 692019MOTIEhttps:/www.motie.go.kr/common/download.do?fid=bbs

157、&bbs_cd_n=72&bbs_seq_n=210222&file_seq_n=1Green New Deal 702020The Government of the Republic of Koreahttps:/content.gihub.org/dev/media/1192/korea_korean-new-deal.pdfCarbon Neutral Strategy 2050 712020The Government of the Republic of Koreahttps:/unfccc.int/sites/default/files/resource/LTS1_RKorea.

158、pdfTable 4:Summary:Korean Policies for Decarbonizing the Steel Sector66 Joint Interagency,South Korea,2050 2050 Carbon Neutrality Scenario Draft,2021,https:/tips.energy.or.kr/uplolad/carbon/1_2050 -.pdf.67 International Carbon Action Partnership,“Korea Emissions Trading Scheme,”2015,https:/ Ministry

159、 of Economy and Finance,South Korea,Industrial Growth Strategy Through Circular Economy Revitalization,June 21,2023,https:/www.moef.go.kr/com/cmm/fms/FileDown.do;jsessionid=0.node20?atchFileId=ATCH_000000000023349&fileSn=6.69 Ministry of Trade,Industry and Energy,“Hydrogen Economy Roadmap of Korea,”

160、2019,https:/faolex.fao.org/docs/pdf/kor209756.pdf.70 Government of the Republic of Korea,“Korean New Deal:National Strategy for a Great Transformation,”July 2020,https:/content.gihub.org/dev/media/1192/korea_korean-new-deal.pdf.71 Government of the Republic of Korea,“2050 Carbon Neutral Strategy of

161、the Republic of Korea:Towards a Sustainable and Green Society,”December 2020,https:/unfccc.int/sites/default/files/resource/LTS1_RKorea.pdf.35FORGING A POST-CARBON INDUSTRYINSIGHTS FROM ASIAd.The European Steel StrategyThe European Union is a leading player in global steel production,and the sector

162、is critical to its economy,providing around 330,000 direct jobs and 2.5million indirect jobs.The EU steel industry is also responsible for approximately 5percent of the EUs CO2 emissions,making its decarbonization essential for achieving the EUs broader climate goals of reducing GHG emissions by 55p

163、ercent by 2030 and achieving climate neutrality by 2050.72The decarbonization of the steel industry in Europe is a complex issue that involves both the European Union and its Member States.While the EU sets overarching climate goals and provides funding mecha-nisms,Member States have their own speci

164、fic strategies and prio-rities.Overall,the EU and its Member States committed approximately 10.5billion for steel sector decarbonization projects from January 2023 to March 2024.This funding structure includes a mix of direct grants,soft loans,and,increasingly,OPEX compensation.This can lead to a so

165、mewhat disorganized policy landscape,with varying approaches and timelines for achieving decarbonization targets,poten-tially complicating the overall coordination and effectiveness of Europes efforts to reduce CO2 emissions in the steel sector.A significant fac-tor contributing to this challenge is

166、 the uneven financial capacity of Member States to invest in the decarbonization of their industrial sectors.72 Joint Research Centre,European Commission,“EU Climate Targets:How to Decarbonise the Steel Industry,”June 15,2022,https:/joint-research-centre.ec.europa.eu/jrc-news-and-updates/eu-cli-mate

167、-targets-how-decarbonise-steel-industry-2022-06-15_en.INSTITUT MONTAIGNE36The European StrategyThe EUs strategy for decarbonizing its steel industry hinges on reforming the ETS free allocation system.This reform will gradually increase the car-bon price burden on the industry,thereby creating strong

168、er incentives for stringent decarbonization efforts starting in 2028.Additionally,the implementation of the EU CBAM will enable the European steel sector to remain competitive in the European market compared to non-EU compe-titors.The carbon levy is intended to offset the cost differences imposed by

169、 the carbon price,reducing the risk associated with low-carbon steel production in Europe.While this measure will affect the sectors compe-titiveness outside the European market,it is considered neutral for the European steel sector,as the EU is a net importer of steel.73The European strategy focuse

170、s on the deployment of breakthrough technologies such as hydrogen-based steelmaking,advanced elec-trification through EAFs,and,to a lesser extent,carbon capture and storage.Hydrogen-based direct reduced iron(H2-DRI)is particularly emphasized,with projects across Europe aiming to replace conventional

171、 blast furnaces with hydrogen alternatives.The first H2-DRI in the world was produced at the Hybit Plant in Sweden.74 The REPowerEU plan optimistically antici-pates that around 30percent of the EUs primary steel production will be decarbonized using renewable hydrogen by 2030.7573 In 2023,the EU imp

172、orted 26 million tons of finished steel products and exported 16.3 million tons of finished steel products.See:European Steel Association(EUROFER),“European Steel in Figures 2024,”2024,pp.37,43,https:/www.eurofer.eu/assets/publications/brochures-booklets-and-fact-sheets/european-steel-in-figures-202

173、4/European-Steel-In-Figures-2024-v2.pdf.74 HYBRIT,“HYBRIT:SSAB,LKAB and Vattenfall First in the World with Hydrogen-Reduced Sponge Iron,”June 21,2021,https:/www.hybritdevelopment.se/en/hybrit-ssab-lkab-and-vattenfall-first-in-the-world-with-hydrogen-reduced-sponge-iron.75 Julian Somers,Joint Researc

174、h Centre,“Technologies to Decarbonise the EU Steel Industry,”2022,https:/op.europa.eu/en/publication-detail/-/publication/fd3b326a-8aed-11ec-8c40-01aa75ed71a1/language-en.37FORGING A POST-CARBON INDUSTRYINSIGHTS FROM ASIACCUS is another strategy that is being considered,but there have been only a fe

175、w projects of this type so far.76 CCUS involves capturing CO2 emissions directly from steel plants and either reusing them in industrial processes or storing them underground.Projects such as the Dunkirk CCS initiative in France and similar endeavors in Belgium and Austria highlight this approach.Th

176、e success of CCUS depends heavily on the development of robust infrastructure and the implementation of supportive regulatory frameworks that are still in their early stages,posing significant imple-mentation challenges.The newly adopted Net-Zero Industrial Act is intended to accelerate this work.Th

177、e EU LevelBoth the EU and individual Member States provide financial support for decarbonizing the steel sector.The EU primarily funds R&D and the initial deployment of innovative technologies through Horizon Europe,the EU Research Fund for Coal and Steel(RFCS),and the Innovation Fund.In contrast,su

178、bstantial CAPEX support,particularly for building new facilities and scaling up green technologies,comes from national government subsidies.The European Steel Technology Platform(ESTEP),as part of the broa-der EU industrial policy strategy,facilitates collaboration among stakehol-ders to develop and

179、 implement innovative low-carbon technologies in steel production.ESTEPs activities include promoting hydrogen-based steelmaking and carbon capture technologies and supporting over 100decarbonization projects that could collectively reduce emissions by 30percent by 2030.This project aims to bring br

180、eakthrough techno-logies to the large-scale demonstration stage by 2030.7776 There are three relatively minor projects in Europe to use CCUS in the steel sector:the Steelanol CCU project in Ghent,a CCS pilot in Dunkirk,France,and another pilot at Voestalpine in Linz,Austria.The vast majority of rece

181、nt projects focus on hydrogen.77 European Steel Technology Platform(ESTEP),“Clean Steel Partnership,”accessed September 3,2024,https:/www.estep.eu/clean-steel-partnership.INSTITUT MONTAIGNE38The EU Research Fund for Coal and Steel(RFCS)is a central funding mechanism designed to foster innovation and

182、 research in Europes coal and steel sectors,leveraging the legacy assets of the former European Coal and Steel Community.78 It supports projects aimed at improving environmental sustainability,energy efficiency,and industrial safety,with a strong focus on reducing CO emissions in steel production an

183、d enhan-cing the recyclability of materials.Additionally,the Clean Steel Partnership,launched under the Horizon Europe program and the RFCS,is funded by a combination of EU and private sector contributions.The EU has committed 700million to this initiative for the period 20212027,which is matched by

184、 an expected 1billion from the private steel sector.This partnership aims to deve-lop breakthrough technologies to drastically reduce CO2 emissions from steel production.Finally,the EUs Innovation Fund,financed by the EU ETS,also plays a role in providing CAPEX for the demonstration of low-CO2 plant

185、s.The Innovation Fund covers up to 60percent of total project costs.79 In 2024,the fund opened a 4billion call for proposals,targeting various industrial sectors,including steel.This funding supports large-scale projects(with CAPEX over 100million)and medium-scale projects(CAPEX between 20million an

186、d 100million),among others.Overall,in line with its com-mitment to advancing innovative technologies in the steel sector,the EU Innovation Fund provided over 399million in funding between 2021 and 2024(for four projects,the largest of which are in Sweden).8078 European Commission,“Research Fund for

187、Coal and Steel(RFCS),”accessed September 11,2024,https:/research-and-innovation.ec.europa.eu/funding/funding-opportunities/funding-pro-grammes-and-open-calls/research-fund-coal-and-steel-rfcs_en.79 European Commission.“Innovation Fund Projects,”accessed September 9,2024,https:/climate.ec.europa.eu/e

188、u-action/eu-funding-climate-action/innovation-fund/innovation-fund-projects_en.80 European Commission,“Innovation Fund Portfolio of the Signed Projects,”accessed September9,2024,https:/dashboard.tech.ec.europa.eu/qs_digit_dashboard_mt/public/sense/app/6e4815c8-1f4c-4664-b9ca-8454f77d758d/sheet/bac47

189、ac8-b5c7-4cd1-87ad-9f8d6d238eae/state/analysis.39FORGING A POST-CARBON INDUSTRYINSIGHTS FROM ASIAThe Member State LevelThe EU Member States each have their own specific strategies and fun-ding mechanisms,representing the largest proportion of the aid given to industries.This can lead to a somewhat d

190、isorganized policy landscape with varying approaches,financial means,and timelines for achieving decarbonization targets,potentially complicating the overall coordina-tion and effectiveness of Europes efforts to reduce CO2 emissions in the steel sector.France has its own strategy for decarbonizing i

191、ts steel industry and aims to cut overall industrial emissions by 35percent by 2030 compared to 1990 levels.81 Initially,this plan was supported by an investment of 5.5billion under the France 2030 plan.However,in October 2023,the government revised this allocation,reducing the decarbonization fund

192、by 1billion,bringing the total to 4.5billion.82 Despite this reduction,4billion remains earmarked for high-quality decarbonization projects and 1billion for deploying low-carbon technologies.The strategy emphasizes carbon capture and storage(CCS),the produc-tion of low-carbon hydrogen,and the increa

193、sed use of biomass.Notably,ArcelorMittals projects in Fos-sur-Mer and Dunkirk are central to this plan,with combined investments of 1.7billion aimed at imple-menting EAF and H2-DRI technologies.8381 Ministre de lconomie,des Finances et de la Souverainet industrielle et numrique,Le gou-vernement dvoi

194、le son plan daction pour dcarboner lindustrie,February 8,2022,https:/www.economie.gouv.fr/plan-action-gouvernement-pour-decarboner-industrie.82 Ministre de lconomie,des Finances et de la Souverainet industrielle et numrique,“Matriser la dpense pour investir dans lavenir,”September 27,2023,https:/www

195、.budget.gouv.fr/files/files/plf/plf-2024/dossier-presse-projet-de-loi-de-finances-2024.pdf.83 ArcelorMittal,“1.7 Billion Decarbonisation Investment to Transform Our French Steelmaking Operations,”accessed September 3,2024,https:/ MONTAIGNE40Germany,one of Europes largest steel producers,also plans t

196、o decarbo-nize its steel industry despite growing issues in this sector in the country.Germanys strategy focuses on the use of hydrogen to replace coal in steel production,supported by significant government funding and publicprivate partnerships.The German government has launched a 50billion fundin

197、g program to support energy-intensive industries such as steel with the aim of ensuring they can transition to climate-neu-tral production.84 The country will also subsidize OPEX using innovative carbon contracts for difference(CCfD)that will most likely support low-carbon steel production.Notable p

198、rojects include Thyssenkrupps green steel initiative,which has attracted a 2billion subsidy package from the German government and received EU approval.85 Additionally,Salzgitter Flachstahl has been granted over 1billion for decarbonization activities.86The German subsidy efforts alone will not be s

199、ufficient to replace the countrys entire BFBOF capacity.While companies such as Thys-senKrupp and Salzgitter have already begun construction,ArcelorMittal remains undecided on whether to proceed with its investment,despite the available funding.The initial strategy involved launching operations with

200、 natural gas and gradually transitioning to hydrogen as it becomes available at scale.However,the economic feasibility of this“on-ramp”was 84 Germany Trade&Invest(GTAI),“Germany Targets Billions for Steel Sector Decarboniza-tion,”June 16,2023,https:/www.gtai.de/en/invest/industries/energy/germany-ta

201、rgets-bil-lions-for-steel-sector-decarbonization-1011840.85 European Commission.“State Aid:Commission Approves German 550 Million Direct Grant and Conditional Payment Mechanism of up to 1.45 Billion to support ThyssenKrupp Steel Europe in Decarbonising its Steel Production and Accelerating Renewable

202、 Hydrogen Uptake,”July 20,2023,https:/ec.europa.eu/commission/presscorner/detail/en/IP_23_3928;Thyssenkrupp,“Thyssenkrupp Steel to Receive Federal and State Government Funding Totaling around Two Billion Euros,”July26,2023,https:/www.thyssenkrupp- Federal Ministry for Economic Affairs and Climate Ac

203、tion(BMWK),“Habeck and Weil Hand over Funding Notice Worth Nearly One Billion Euros,”April 18,2023,https:/www.bmwk.de/Redaktion/EN/Pressemitteilungen/2023/04/230418-habeck-and-weil-hand-over-funding-notice-worth-nearly-one-billion-euros.html.41FORGING A POST-CARBON INDUSTRYINSIGHTS FROM ASIAcompromi

204、sed by the surge in natural gas prices resulting from Rus-sias war on Ukraine,making the shift to hydrogen less attractive in the near term.87Other major steel-producing countries in the EU such as Italy,Spain,and the Netherlands are also making strides toward decarbonization.Italy,for example,is fo

205、cusing on direct reduction pilot plants powered by hydrogen.Spain is investing in various projects including the use of green electricity and circular economy principles to minimize the carbon foot-print of steel production.The Netherlands,home to Tata Steels IJmuiden plant,is exploring innovative i

206、ronmaking technologies such as HIsarna,which aims to significantly reduce CO2 emissions.Key ChallengesEurope holds a dominant position in the global engineering market for steel manufacturing equipment,with the top three companies SMS Group,88 Danieli,89 and Primetals 90 headquartered within the EU.

207、Danieli has developed its own DRI technology,while SMS Group and Primetals serve as the primary licensees of the Midrex technology,which is being explored in the United States.This gives the European steel industry a significant advantage in the production and deployment of advanced DRI solutions.Th

208、e transition to carbon neutrality in the European steel sector hinges on the availability of cost-competitive fossil-free energy carriers 87 For more on the current situation in Germanys steel sector,see:Federal Ministry for Econo-mic Affairs and Climate Action,“Drucksache 20/11678,”2024,https:/tabl

209、e.media/wp-content/uploads/2024/07/04153753/2024-07-02-Antwort-BuRe-KA-Gruener-Stahl-Drs.-20-11678-2-1.pdf.88 SMS Group,corporate website,accessed September 9,2024,https:/www.sms-.89 Danieli,corporate website,accessed September 9,2024,https:/ Primetals Technologies,corporate website,accessed Septemb

210、er 9,2024,https:/.INSTITUT MONTAIGNE42especially electricity and clean hydrogen steelmaking and related infrastructure,including for CO2 transport and storage,as well as car-bon recycling mechanisms.However,the choice of decarbonization vectors is also subject to local conditions regarding the avail

211、ability of renewable and low-carbon resources.The EU has enacted ambitious climate policies with short-,middle-,and long-term instruments for decarbonization.Under current legislation and industry projections,the continued operation of BFBOF plants in Europe will become virtually impossible shortly

212、after the end of the free allocations in the EU ETS(2038 by some projections).This has still led to a marked increase in the pace of decarbonization initiatives,highlighted by significant recent investments.Despite this progress,there remains no viable business case for large-scale investments in gr

213、een steel without substantial state support.The financial hurdles in decarbonizing the steel industry are significant,requiring major public funding to drive the transition to low-carbon production methods.Against this backdrop,in the steel sector,two main challenges to the low-carbon transition rem

214、ain.The first is the price gap,as the cost of green steel production is around 30100percent more expensive than that of traditional fossil-based steel.The second challenge is the depen-dence on regional markets for energy sources for low-carbon steel,such as hydrogen and electricity,rather than on t

215、he global market,mea-ning that EU steel producers need to contend with regional prices rather than global ones,as well as with local conditions regarding resource avai-lability.To achieve its target of cutting GHG emissions by 55percent by 2030 and carbon neutrality by 2050,the current EU projects n

216、eed to be expanded to an industrial scale.Within the EU,the capacity investment needs for low-carbon projects in the steel sector are estimated by sector repre-sentatives to reach the following amounts:9143FORGING A POST-CARBON INDUSTRYINSIGHTS FROM ASIA 31billion for capital expenditures(CAPEX)by 2

217、030.54billion for operating expenditures(OPEX)by 2050.This level of investment is not currently being met by European industries or public authorities.91 European Steel Association(EUROFER),“Low-CO2 Emissions Projects,”May 23,2022,https:/www.eurofer.eu/issues/climate-and-energy/maps-of-key-low-carbo

218、n-steel-projects.EU Policy/DirectiveSpecific Targets/RequirementsDescriptionFit-for-55 Package,2021 92Reduce emissions by 55%by 2030 compared to 1990 levels.Emphasis on using hydrogen in steel production and implementing CCS technologies.EU Emissions Trading System(ETS)93 and CBAM 94,2023Gradual red

219、uction in the cap on emissions allowances by 2.2%annually.Total end of free allocation by 2034.Introduction of Carbon Border Adjustment Mechanism(CBAM).Reduces emissions allowances over time and prevents carbon leakage by adjusting the price of carbon at the border for imported steelEnergy Efficienc

220、y Directive(EED)95,2023Improve energy efficiency by 32.5%by 2030.+further increase its energy efficiency ambition by at least 11.7%in 2030 compared to the level of efforts under the 2020 EU Reference Scenario.Targets improvements in energy efficiency.(no precise target by sector).Most industries are

221、 obliged to implement a system of energy management.No precise target by sectorRenewable Energy Directive(RED III)96,2023Increase the share of renewable energy in the EUs energy mix to 42.5%by 2030 in all sectors.Annual increase in the share of renewable energy in each sector by 1.6%until 2030.Circu

222、lar Economy Action Plan 97,2020The plan aims to increase the recycling rate from 33%in 2020 to over 50%by 2050.Promotes sustainable product design,increases recycling rates,and reduces waste.Table 5:Summary:EU Policies for Decarbonizing the Steel SectorINSTITUT MONTAIGNE44EU Policy/DirectiveSpecific

223、 Targets/RequirementsDescriptionEcodesign for Sustainable Products Regulation(ESPR)98,2024Expands the Ecodesign Directive(2009/125/EC)to cover nearly all products,focusing on sustainability and circular economy principles.ESPR aims to improve product design to enhance durability,recyclability,and en

224、ergy efficiency while reducing overall environmental impact throughout the product life cycle.Targets industries,including steel,to decarbonize production and use more recycled materials.Industrial Emissions Directive(IED)99,2022 Reduce industrial emissions through the application of Best Available

225、Techniques(BAT).Ensures industries use BAT to minimize emissions:CCUS,Scrap,DRI,EAF,heat recovery.92 European Commission,“Delivering the European Green Deal,”accessed September 9,2024,https:/commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal/deli-vering-european-green-

226、deal_en.93 European Commission,“EU Emissions Trading System(EU ETS),”accessed September 9,2024,https:/climate.ec.europa.eu/eu-action/eu-emissions-trading-system-eu-ets_en.94 European Commission,“Carbon Border Adjustment Mechanism,”accessed September 9,2024,https:/taxation-customs.ec.europa.eu/carbon

227、-border-adjustment-mechanism_en.95 European Commission,“Energy Efficiency Directive,”accessed September 9,2024,https:/energy.ec.europa.eu/topics/energy-efficiency/energy-efficiency-targets-directive-and-rules/energy-efficiency-directive_en.96 European Union,“Directive(EU)2023/2413 of the European Pa

228、rliament and of the Council of 18 October 2023,”October 18,2023,https:/eur-lex.europa.eu/legal-content/EN/TXT/?uri=OJ:L_202302413.97 European Commission,“Circular Economy Action Plan,”accessed September 9,2024,https:/environment.ec.europa.eu/strategy/circular-economy-action-plan_en.98 European Commi

229、ssion,“Ecodesign for Sustainable Products Regulation,”accessed September 9,2024,https:/commission.europa.eu/energy-climate-change-environment/standards-tools-and-labels/products-labelling-rules-and-requirements/sustainable-products/ecodesign-sustainable-products-regulation_en.99 European Commission,

230、“Industrial and Livestock Rearing Emissions Directive(IED 2.0),”accessed September 9,2024,https:/environment.ec.europa.eu/topics/industrial-emissions-and-safety/industrial-and-livestock-rearing-emissions-directive-ied-20_en.45FORGING A POST-CARBON INDUSTRYINSIGHTS FROM ASIAe.Electrifying the Steel S

231、ectorThe EAF process for producing secondary steel involves melting scrap steel with an electric arc,significantly reducing reliance on primary steel-making methods and therefore lowering CO2 emissions.This process is particularly suitable for developed economies with abundant scrap steel supplies.T

232、his process alone is capable of reducing carbon dioxide emissions by nearly 90percent per ton of crude steel produced.To be carbon neutral,this process requires access to abundant clean electricity.Despite its benefits,scaling the EAF process globally faces several challen-ges.One major hurdle is th

233、e variation in scrap steel quality,which can contain impurities that affect the steels properties,posing challenges for industries requiring high-grade materials such as the automotive and aerospace sectors.Additionally,the availability and quality of scrap steel vary significantly across regions,im

234、pacting the feasibility of widespread adoption.Enhancing the efficiency and output quality of EAF steel requires advanced sorting and pretreatment technologies to remove impurities,increasing both operational complexity and costs.The global steel industry is investing in R&D to overcome these obstac

235、les.Some innovations,such as using plastic waste as a foaming agent in EAFs,have shown promise in improving sustainability and reducing costs.100f.Electrification in ChinaIt has become fashionable to describe China as the worlds first“electros-tate”a country leading the global electrification revolu

236、tion.A significant part of Chinas strategy to decarbonize the steel industry is outlined in the“Implementation Plan for Carbon Peaking in the Industrial Sector”101 100 World Steel Association,“Climate Change and the Production of Iron and Steel,”2021,https:/worldsteel.org/wp-content/uploads/Climate-

237、change-production-of-iron-and-steel-2021.pdf.101 State Council of the Peoples Republic of China,“Implementation Plan for Carbon Peaking in the Industrial Sector.”INSTITUT MONTAIGNE46and the MIIT“Guidelines for the Steel Sector.”102 These documents focus heavily on the development of EAFs to reduce e

238、missions.This could be one of the low-hanging fruit of Chinas industrial decarbonization.The steel sector is currently predominantly based on primary steel production and lacks effective recycling policies.EAFs are seen as a straightforward way to reduce emissions in the short term while main-tainin

239、g sufficient production levels.The initial target is to produce up to 15percent of steel from EAFs by 2025.To achieve this 15percent EAF production target by 2025,China would need to produce 143mtpa using EAF technology.As of January 2024,China has 151mtpa of EAF capacity in operation,indicating tha

240、t the necessary infrastructure is already in place,provided that EAF capacity utiliza-tion rates are optimized.103 Furthermore,the MIIT guidelines for 2030 have fluctuated over time.Initially,in 2020,the goal was for 20percent of Chinese steel to come from EAFs by 2030.104 This target was scaled bac

241、k in the MIIT 2022 decarbonization plan due to concerns that increasing EAF capacity amid overcapacity would necessitate significant reductions in BF operations,a potentially disruptive strategy for many provinces that are still investing in these traditional carbon-intensive furnaces.A major limita

242、tion in the electrification of the Chinese steel industry is the difficulty of accessing steel scrap in China,although this supply is expected to increase.105 This leads to some EAFs being fed not with 102 Ministry of Industry and Information Technology,China,“14th Five-Year Plan for Green Indus-tri

243、al Development.”103 Global Energy Monitor,“In China,a Small Boost to Low-Emissions Steelmaking Can Mean Big Cuts to Its Carbon Footprint,”China Steel Brief,March 2024,https:/globalenergymonitor.org/wp-content/uploads/2024/03/GEM-China-steel-brief-March-2024.pdf.104 State Council of the Peoples Repub

244、lic of China,“Guiding Opinions from Three Ministries on Promoting High-Quality Development of the Steel Industry.”105 There are hardly any sophisticated models projecting steel availability/supply.However,some sources expect an increase to 320million tons by 2025,390 million tons by 2030,and up to 5

245、00million tons by 2050.See:Global Energy Monitor,“Global Steel Plant Tracker.”47FORGING A POST-CARBON INDUSTRYINSIGHTS FROM ASIArecycled steel scrap but with pig iron from traditional coal-based BFs due to the current scrap shortage and massive availability of pig iron.106 Another significant challe

246、nge is the availability of low-carbon electri-city.Despite Chinas gigantic renewable electricity generation capacity,it has not yet met the growing demand from the grid,leading many cur-rent EAFs to be powered by coal-based electricity.Main National Strategy to Enhance the Use of Electric Arc Furnac

247、esThe success of the Chinese electrification strategy relies on a complete overhaul of the countrys recycling capacity.The“14th Five-Year Plan on Raw Materials”107 and the“Steel Industry Development Guidelines”108 prioritize electrification in the short term,encouraging provinces to support the tran

248、sition to EAFs connected to low-carbon energy sources and implement policies to improve access to steel scrap.Traditional industrial policy instruments,such as fiscal incentives and the creation of a price index for scrap iron and steel,are used to guide the mar-ket.These documents set specific targ

249、ets,such as achieving a 30percent ratio of scrap steel utilization in steelmaking by the end of the 14th Five-Year-Plan period and reaching 200million tons of annual pro-cessing capacity for scrap iron and steel.The national government also implemented a clean electricity consumption mandate that ma

250、y have an effect on the current usage of clean electricity by EAF in China.109106 This is the current reality of Chinese EAFs,which are the most carbon-intensive in the world,with 2.1 tn.CO2/tn.steel compared to a global average of 1.3 tn.CO2/tn.steel.107 Ministry of Industry and Information Technol

251、ogy,China,“14th Five-Year Plan for the Development of the Raw Materials Industry.”108 State Council of the Peoples Republic of China,“Guiding Opinions from Three Ministries on Promoting High-Quality Development of the Steel Industry.”109 National Development and Reform Commission,China,“Notice on St

252、rengthening the Coordination of Green Power Certificates and Energy Conservation and Carbon Reduction Policies to Vigorously Promote Non-Fossil Energy Consumption.”INSTITUT MONTAIGNE48Currently,however,most experts and Chinese industrialists interviewed for this study emphasize that EAFs powered by

253、renewable energy are still less competitive than coal-based processes.Therefore,without subs-tantial subsidies,a reform of the electricity market,and the imple-mentation of a significant carbon price,this competitiveness issue is unlikely to change,even if additional EAF capacity is built.Furthermor

254、e,current R&D support for improving EAFs and scrap quality is not at the forefront of the Chinese steel sector strategy.110 Indeed,most funding and guidance is going toward other technologies,particularly CCUS and hydrogen reduction processes.g.Electrification in JapanThe Japanese government has lai

255、d out an extensive strategy to promote electrification within the steel sector.The Technology Roadmap for Iron and Steel 111 plans to expand EAF and improve the technology to large-scale EAF and low-impurity EAF steel from 2030.Key ChallengesOne of the primary hurdles in shifting to EAF technology i

256、n Japan is the low level of utilization of high-quality steel scrap in the country.This scarcity is compounded by the high demand for scrap from other sectors and the export of scrap metal.To address the scrap availability issue,the government is considering implementing new policies including stric

257、ter regulations on scrap exports and incentives for recycling 110 While EAF is a mature technology,research could still be valuable in improving scrap sorting and feedstock monitoringpotentially through AI technology.This would enhance the quality of secondary steelmaking,minimizing the reliance on

258、virgin pig iron or HBI to achieve the desired steel grades.111 Ministry of Economy,Trade and Industry,Japan,“Technology Roadmap for Transition Finance in Iron and Steel Sector,”October 2021,https:/www.meti.go.jp/english/press/2021/pdf/1027_002a.pdf.49FORGING A POST-CARBON INDUSTRYINSIGHTS FROM ASIAw

259、ithin Japan.Also under consideration is financing the development of advanced sorting and processing technologies to improve the quality and availability of scrap for EAF use.The high cost of electricity in Japan,coupled with the need for subs-tantial investment in grid infrastructure,complicates th

260、e electrifi-cation strategy.Although EAFs are less carbon-intensive,they require significant amounts of electricity,making their operation economically challenging without substantial support and subsidies.The government is,therefore,considering policies to reduce electricity costs for steel produce

261、rs,such as subsidies for renewable energy use and invest-ments in grid infrastructure to support the increased demand from elec-trified steel production.Additionally,the quality of steel produced by current EAF technologies does not meet the demands of the Japanese economy,particularly in car and ma

262、chine manufacturing,which requires higher-quality steel.The-refore,switching completely to EAFs in the near future is not consi-dered desirable by most industry stakeholders,who are calling for further development of technologies to remove impurities from scrap steel.Policy Framework and StrategiesT

263、he Japanese governments Green Growth Strategy,launched in December 2020,includes support for the development and adoption of EAF technology.112 The government aims to promote the transition to EAFs by providing financial incentives,investing in R&D,and sup-porting the necessary infrastructure develo

264、pments.Through the 112 Ministry of Economy,Trade and Industry,Japan,“Green Growth Strategy through Achieving Carbon Neutrality in 2050.”INSTITUT MONTAIGNE50Green Innovation Fund,the Japanese government has allocated JPY 23.6billion(approximately 149million)to support the electrification of the steel

265、 sector.113 Additionally,the GX Transition Bonds,114 designed to attract private investment in green projects,are also supposed to pro-vide additional financial support for electrification(under the renewable energy use portfolio of JPY 31 trillion,or approximately 195.51billion).The Japanese strate

266、gy places a strong emphasis on R&D.The Green Innovation Fund supports various projects aimed at improving the performance of EAFs(which are currently 30percent less efficient than BFs).For instance,significant investments are being made to tackle the challenges associated with removing impurities in

267、 scrap steel,which is crucial for producing high-quality steel through the EAF route and esta-blishing large-scale EAFs,as the technology roadmap sees emerging from 2040.The Japanese government is also implementing various regulatory measures to support the transition to electrified steel production

268、.These include setting ambitious targets for scrap utilization and creating market mechanisms to ensure the availability of low-carbon electri-city,especially where EAFs are located.115h.Electrification in South KoreaSouth Korea is also actively pursuing policies to increase the use of EAFs as part

269、of its broader decarbonization strategy for the steel industry.The countrys main vehicle to decarbonize industry the Carbon Neutral 113 Ministry of Economy,Trade and Industry,Japan,“Green Innovation Fund Project.”114 Ministry of Economy,Trade and Industry,Japan,“Japan Climate Transition Bond Framewo

270、rk,”November 2023,https:/www.meti.go.jp/policy/energy_environment/global_warming/transition/climate_transition_bond_framework_eng.pdf.115 Ministry of Economy,Trade and Industry,Japan,“Technology Roadmap Formulated for Transition Finance toward Decarbonization in the Iron and Steel Sectors.”51FORGING

271、 A POST-CARBON INDUSTRYINSIGHTS FROM ASIAIndustrial Core Technology Development Project promotes electrifi-cation,with an emphasis on EAFs in the steel sector.A major obstacle is the demand for primary steel from key customers in the electronics and car manufacturing sectors.South Koreas industrial

272、requirements necessitate a continuous supply of primary steel,which is traditionally produced using blast furnaces.This dependence on primary steel complicates the transition to EAFs.Moreover,South Korea a key importer of scrap metals,notably from Japan still faces limitations in accessing sufficien

273、t quantities of scrap steel,which is crucial for the effective operation of EAFs.Therefore,the govern-ment has set objectives of building a steel scrap ecosystem and enabling access to the resource,which is currently behind in the country.116Scrap Steel StrategyAccess to scrap steel has thus become

274、a central strategy for a country as heavily involved in steelmaking as South Korea.The South Korean govern-ment has,therefore,established a strategy of ensuring a balanced sup-ply and demand of steel resources,with the aim of securing a circular steel economy.117 This involves conducting a detailed

275、statistical investi-gation across all stages of the steel value chain,including the occurrence,demand,and distribution of steel by grade and region.In the first half of 2023,the government launched the“Iron Resources Coexistence Forum”to foster collaboration between steel manufactu-ring companies an

276、d steel scrap companies.To secure a stable scrap sup-ply,efforts will be made to obtain scrap volumes from key international sources,particularly the US and Japan,while reviewing measures to 116 Government of South Korea,“Steel Industry Development Strategy.”117 Ministry of Economy and Finance,South

277、 Korea,“Industrial Growth Strategy Through Circular Economy Revitalization.”INSTITUT MONTAIGNE52prevent the outflow of domestic scrap.In this sense,the economic bat-tle for scrap metal will only become more acute when decarbonization goals are implemented more stringently.The high initial investment

278、 required for transitioning from traditional BFs to EAFs presents another significant challenge.The capital expenditure needed for this shift is substantial,and the existing funding mecha-nisms in South Korea are not sufficient to cover these costs entirely.Additionally,the energy supply and infrast

279、ructure required to support EAF technology present further complications.EAFs demand a stable and substantial supply of electricity,ideally sourced from renewable energy.However,South Koreas current renewable energy infrastructure may not be adequate to meet this increased demand,and the nuclear sec

280、tor itself is considered key for future development.To address these challenges,the government is investing in R&D to improve the efficiency of EAF technology and is providing KRW 24.1bil-lion(approximately 16.2million)toward this end for the period 20242025.118 This includes efforts to enhance the

281、efficiency of EAFs and to integrate them with imported DRI steel.By importing DRI steel,South Korea can supplement the scrap steel supply needed for EAF operations,facilitating the transition to greener steel production methods.Companies are also betting on improving and expanding their use of EAFs.

282、Dongkuk Steel is planning to complete an R&D project on hyper-electric furnaces by 2028.119 POSCO is betting on the establishment of renewable electric furnaces based on bridge technology by 2030 and expects to close down all its coal processes by 2050.120118 Ministry of Economy and Finance,South Ko

283、rea,“Industrial Growth Strategy Through Circular Economy Revitalization.”119 An advanced type of EAF,see:Dongkuk Steel,“Steel for Green,”2022,https:/ POSCO,“POSCOs Initiative for a Clean Earth,”accessed October 1,2024,https:/www.posco.co.kr/homepage/docs/eng7/jsp/climate/s91c6000010a.jsp.53FORGING A

284、 POST-CARBON INDUSTRYINSIGHTS FROM ASIAi.Electrifying the European Steel SectorThe advancement of EAF technology in Europe marks a stride toward decarbonizing the steel industry.Electrification in Europe presents a viable solution to some of the challenges of deploying hydrogen reduc-tion steelmakin

285、g,given the high costs associated with producing or importing clean hydrogen.If the main strategy to decarbonize the steel industry in Europe is still targeting hydrogen reduction,the future of European steel in a post-carbon world may rely heavily on EAF tech-nology,potentially supported by a model

286、 of importing primary steel or reduced iron.The Political Economy of EAF in EuropeAt the European level,support and strategies for electrifying the steel sector and industry in general are relatively weak.Overall,industries electrification strategies mostly depend on national poli-cies,which play a

287、crucial role in supporting EAF adoption.For instance,Germany has pledged 1.3billion to help decarbonize steel production by building EAFs at ArcelorMittals factories in Bremen and Eisenhttens-tadt.121 This funding is part of a larger 2.5billion investment package aimed at reducing carbon emissions b

288、y 60percent by 2030.122The growing market demand for low-carbon steel,driven by consumer preferences and corporate sustainability goals,supports the economic 121 Federal Ministry for Economic Affairs and Climate Action(BMWK),“Habeck bergibt Fr-derbescheid ber rund 1,3 Milliarden Euro an ArcelorMitta

289、l”Habeck Delivers Grant of Around 1.3 Billion Euros to ArcelorMittal,May 30,2024,https:/www.bmwk.de/Redaktion/DE/Presse-mitteilungen/2024/05/20240530-foerderbescheid-1.3-mrd-euro-arcelormittal.html.122 Jack McGovan,“German Govt Pledges 1.3 Bln in Funding to Help Decarbonise Steel Production,”Clean E

290、nergy Wire,February 6,2024,https:/www.cleanenergywire.org/news/german-govt-pledges-eu13-bln-funding-help-decarbonise-steel-production.INSTITUT MONTAIGNE54viability of EAF technology and,therefore,the demand for scrap.Des-pite the high electricity costs associated with its operation,countries with ab

291、undant renewable energy sources,such as Spain and the Nordic nations,find EAF technology particularly viable.123In contrast to most of its Asian counterparts,Europe benefits from a robust recycling infrastructure,ensuring a steady supply of steel scrap,which is essential for EAF operations.However,o

292、ver the past decade,the EUs scrap exports have surged significantly,primarily to Tr-kiye.124 Some have raised concerns that the current CBAM regulation does not include pre-consumer scrap,potentially creating a loophole that could allow CBAM requirements to be easily circumvented.125123 Halina Yermo

293、lenko,“European Investment in the EAF Continues to Grow,”July 6,2023,GMK Center,https:/gmk.center/en/news/european-investment-in-the-eaf-continues-to-grow/.124 In 2021,the EU exported 13.1 million tons of ferrous scrap to Trkiye,making it the largest destination for EU scrap,accounting for nearly 48

294、percent of all EU ferrous metal exports.This trend continued into 2023,with Trkiye remaining the primary destination,receiving 12.2million tons of recyclable raw materials from the EU.See:Eurostat,“Exports in Recyclable Raw Materials Increased in 2023,”May 22,2024,https:/ec.europa.eu/eurostat/web/pr

295、oducts-eurostat-news/w/ddn-20240522-1.125 Sandbag Smarter Climate Policy,“A Scrap Game:Impacts of the EU Carbon Border Adjustment Mechanism,”June 3,2024,https:/sandbag.be/2024/06/03/a-scrap-game-cbam-impacts/.024681012Figure 2:EU steel scrap exports by destinationTurkiyeIndiaUnited Kingdom Countries

296、EgyptIndonesiaExports(million tons)55FORGING A POST-CARBON INDUSTRYINSIGHTS FROM ASIATo address the environmental concerns associated with scrap exports,the EU is revising its Waste Shipment Regulation.The updated regu-lation,which was adopted in April 2024 and will take full effect by May 2027,intr

297、oduces stricter controls on the export of waste,particularly to non-OECD countries.These countries must now demonstrate their capability to manage the waste sustainably before they are permitted to receive it.This regulatory overhaul aims to bolster the circular economy within the EU by ensuring tha

298、t waste is recycled and reused within the union,thus supporting the EAF sector and reducing the environmen-tal impact of waste exports.126The Future Role of EAF in EuropeEAF technology currently accounts for 44percent of Europes steel production,especially in countries with strong recycling systems

299、and access to affordable electricity.127 Italy and Spain,where projects focus on integrating clean electricity into the steelmaking process,are notable leaders in this field.For instance,ArcelorMittals initiatives in Sestao,Spain,aim to utilize green electricity and H-DRI to produce low-carbon steel

300、.128 The integration of renewable energy into the steel production process offers a promising pathway to sustainability,but it also requires substantial investment and poses risks related to energy supply stability and cost.126 European Commission,“New Regulation on Waste Shipments Enters into Force

301、,”May 20,2024,https:/environment.ec.europa.eu/news/new-regulation-waste-shipments-enters-force-2024-05-20_en.127 Annalisa Villa,“Europe to Press on with Low-Emission Steel Production Projects in 2024,”S&P Global,December 12,2023,https:/ ArcelorMittal,“ArcelorMittal Sestao to Become the Worlds First

302、Full-Scale Zero Carbon-Emissions Steel Plant,”July 2021,https:/ MONTAIGNE56Looking ahead,EAFs could play an even more significant role,particularly if primary steelmaking or ironmaking is transferred outside of Europe due to the high costs associated with hydrogen production.Hydrogen-based steelmaki

303、ng,while promising,is currently expensive.If Europe shifts primary steelmaking abroad,EAF technology,relying on recycled steel scrap or imported reduced iron,could become the predomi-nant method within the continent.j.Producing Primary Steel Using Clean HydrogenDecarbonizing the primary steel produc

304、tion process is a complex challenge.The production of iron,which is the precursor to steel,is parti-cularly carbon-intensive.There are two primary reasons for this:first,the process requires enormous amounts of heat,and second,carbon is used as a feedstock to facilitate the chemical reaction necessa

305、ry to reduce iron ore into pure iron.This ironmaking process alone accounts for 3 to 4 giga-tons of GHG emissions annually and is a major source of other pollutants.One classic approach to decreasing steel emissions involves using natural gas in a process called direct reduced iron(DRI),which takes

306、place in a shaft furnace.Unlike traditional BFs using coal,DRI requires less heat and does not melt the iron.Instead,it purifies iron ore,and where natural gas is used,it can be replaced with hydrogen produced from clean elec-tricity.This hydrogen can eliminate the vast majority of GHG emissions ass

307、ociated with iron production.This decarbonizing strategy is the most widely considered by the steel industry worldwide.Traditional steel production methods,which use a BF followed by a BOF,produce,on average,2.44 tons of CO2 equivalents per ton of steel,with massive variations between countries and

308、methods used.129 In contrast,using clean hydrogen DRI associated with an EAF powe-red by clean electricity can reduce emissions by up to 97percent.130 57FORGING A POST-CARBON INDUSTRYINSIGHTS FROM ASIAThe fundamental chemical reaction in steel production involves breaking the bonds between iron and

309、oxygen atoms in iron ore(iron oxide).In tradi-tional methods,carbon from coal serves as the bonding agent,producing CO2 as a byproduct.However,in the hydrogen reduction process,hydrogen replaces carbon,and the byproduct is water vapor instead of CO2.131Different Types of DRI TechDifferent DRI techno

310、logies have varying requirements regarding the quality of iron ore,which is a critical element for decarbonizing the steel industry:132 H2 shaft furnaces require high-grade iron ore(ore with more than 6768percent of iron)to function efficiently.These furnaces operate by using hydrogen to directly re

311、duce iron ore at high tem-peratures,resulting in lower carbon emissions.However,the need for high-grade iron ore is a significant limitation.133 Recent advance-ments aim to allow these furnaces to use lower-grade ore by enhan-cing the reduction process and incorporating robust purification systems t

312、o handle impurities.129 For more on emissions disparities between China,Europe,Japan,and South Korea,see:Ruo-chong Xu et al.,“Plant-by-Plant Decarbonization Strategies for the Global Steel Industry,”Nature Climate Change 13(2023):10671074,https:/ Jessica Terry,Chathurika Gamage,Nick Yavorsky,and Rac

313、hel Wilmoth,“Unlocking the First Wave of Breakthrough Steel Investments in the United States,”RMI,2023,https:/rmi.org/insight/unlocking-first-wave-of-breakthrough-steel-investments-in-the-united-states/.131 Josu Rodrguez Diez,Silvia Tom-Torquemada,Asier Vicente,Jon Reyes,and G.Alonso Orcajo,“Decarbo

314、nization Pathways,Strategies,and Use Cases to Achieve Net-Zero CO2 Emissions in the Steelmaking Industry,”Energies 16,no.21(2023):7360,https:/doi.org/10.3390/en16217360.132 Soroush Basirat,“Green Steel Pathways for the New Hydrogen-Powered DRI-EAF Projects,”Energy Post,April 4,2024,http:/web.archive

315、.org/web/20240520054028/https:/energypost.eu/green-steel-pathways-for-the-new-hydrogen-powered-dri-eaf-projects/.133 Technically,it is not the DRI plants that struggle with lower-grade ores,but rather the EAFs in the second stage of the process.INSTITUT MONTAIGNE58-Midrex is the leading technology f

316、or shaft DRI production and can operate using natural gas,with the ability to gradually integrate hydrogen as it becomes more cost-effective.This flexibility allows for a smoother transition from natural gas to hydrogen,making it a viable option for regions currently reliant on natural gas.-Energiro

317、n technology is an inherently hydrogen-ready tech,mea-ning it can start using hydrogen as a reducing gas without signifi-cant equipment modifications.This technology can handle a variety of iron ore grades,although optimal performance is achieved with higher-grade ores.Energirons capability to adapt

318、 to different redu-cing gases positions it as a crucial technology for the steel industrys transition to lower carbon emissions.The HyREX process,developed by POSCO in South Korea,134 repre-sents a flexible and innovative approach to DRI steel production capable of handling lower-grade iron ore fine

319、s directly in a fluidized bed reactor.Unlike traditional DRI processes that require high-grade iron ore pellets and utilize shaft furnaces,HyREX bypasses the pel-letization step,reducing both costs and carbon emissions.135 By integrating hydrogen reduction with electric melting,HyREX effi-ciently re

320、moves impurities,producing high-quality steel.136 Howe-ver,its significant energy requirements due to the endothermic hydrogen reduction reaction present a challenge,making the pro-cess heavily reliant on consistent and affordable renewable energy sources to maintain reaction temperatures and ensure

321、 economic sustainability.134 POSCO,“Great Conversion to Low-Carbon Eco-Friendly Steelmaking Process(HyREX),”June 2,2022,https:/ For more information see:Agora Industry,“Low-Carbon Technologies for the Global Steel Transformation,”April 11,2024,https:/www.agora-industry.org/publications/low-carbon-te

322、chnologies-for-the-global-steel-transformation.136 Primetals Technologies,“HyREX demonstration plant from POSCO and Primetals Technologies,”August 31,2022,https:/ A POST-CARBON INDUSTRYINSIGHTS FROM ASIAGlobally,around 400 integrated steel mills rely on blast furnaces.137 Each will face a decision w

323、ithin the next 20 years about whether to reinvest in coal-based steelmaking or pivot to cleaner alternatives.For primary steel,the shift to DRI processes using clean hydrogen is crucial,offering a cleaner method and avoiding reinvestment in outdated carbon-inten-sive technology.Currently,some indust

324、rial steel companies,especially in Europe,are transitioning from BFs to“hydrogen-ready”shaft fur-naces.However,the term“hydrogen ready”should be approached with caution,as these furnaces,in the absence of a massive supply of clean hydrogen,will run initially on natural gas,with a vague timeline for

325、transitioning to hydrogen.k.China and Hydrogen SteelmakingChinas industry decarbonization strategy,like that of other countries,aims to develop hydrogen use for steel production.China is a leader in electrolyzer production and plans to leverage its significant advance-ments in renewable energy to pr

326、oduce hydrogen,some of which will be used in the steel industry.However,the Chinese policy on hydrogen use in the steel sector is somewhat flexible.China aims to develop shaft furnaces for DRI and combine hydrogen with natural gas in traditional BFs by 2030.In China,where a large,relatively young fl

327、eet of BFs exists,this technology is being prioritized for the near-to-medium term.This approach reduces emissions but is not carbon neutral,helping to limit the number of stranded assets.In many parts of the world,the availability of hydrogen has limited the development of clean H2-DRI plants.Howev

328、er,China stands out by having 137 SteelWatch,“Sunsetting Coal in Steel Production,”June 2023,https:/steelwatch.org/wp-content/uploads/2023/06/FINAL-SteelWatch_SunsettingCoalInSteel_June2023-sunday-25th-june.pdf.INSTITUT MONTAIGNE60built a substantial share of electrolyzers powered by renewable energ

329、y.Despite being the worlds largest consumer and producer of hydrogen,Chinese hydrogen facilities operate at less than 10percent capacity on average.Therefore,hydrogen availability is not the primary limitation for Chinese H2-DRI production.Instead,the industrys main challenge lies in inadequate ener

330、gy resources.In recent years,China has experienced insufficient power supply and abrupt power cuts,known as the“power shortage,”leading to unstable energy supplies for industrial users and consequences for hydrogen-based DRI deployment and EAF production.138 However,the extensive deployment of renew

331、able energy in the country suggests the potential for a swift and substantial supply of clean hydrogen.This is particularly important for enhancing flexibility within the electricity grid.Conse-quently,this development could significantly incentivize the shift toward hydrogen-based steelmaking in Ch

332、ina.SupportIn 2022,China released its first Hydrogen Industry Development Mid-Long Term Plan(20212035).139 This plan clarifies that hydrogen will be part of Chinas energy supply systems and emphasizes the coordinated deve-lopment of the hydrogen supply chain,including production,storage,transportati

333、on,and utilization,especially in transportation and industrial sectors such as steel.138 Rachel Parkes,“Hydrogen Electrolyser Factories Are Only Operating at 10%Capacity on Average:BNEF,”Hydrogen Insight,February 1,2024,https:/ National Development and Reform Commission,China,“Medium-and Long-Term Plan for Hydrogen Energy Industry Development(20212035).”61FORGING A POST-CARBON INDUSTRYINSIGHTS FRO