T&E: ‘Green steel can help to cut climate impact of car production’

According to the NGO Transport & Environment (T&E), if lawmakers set content requirements, the auto industry can become a leading market for low-carbon steel production in Europe.

Steel made with green hydrogen and electric arc furnaces, or produced from scrap, can reduce the CO2 emissions of producing cars in Europe by 6.9 Mt in 2030, a new analysis from T&E shows.

That’s equivalent to avoiding the annual emissions of 3.5 million fossil fuel cars. The climate impact of producing cars is increasingly under the spotlight as tailpipe emissions are reduced to zero, and the car sector strives to become net zero by 2050.

Green steel should be defined as having a climate impact of between 50 kg and 400 kg of CO2 equivalent per tonne of steel produced, T&E said. This compares with 1,800-2,250kg CO2 equivalent per tonne typically associated with producing conventional steel.

Cost of €57 in 2030, reduced to €8 in 2040

Switching to 40% green steel would add just €57 to the sticker price of an electric vehicle in 2030, according to the analysis by Transport & Environment (T&E) based on a new study by consultancy Ricardo.

T&E analysis of CO2 savings and cost is based on the findings of Ricardo’s study for T&E, The use of green steel in the automotive industry (2024). The analysis assumes that a shift to lightweight will decrease the use of steel in the car sector in the next decade.

Due to CO2 pricing and the falling costs of green steel production, switching to 100% green steel by 2040 will cost only €8 compared to conventional steel. However, T&E adds that securing the billions of euros in investment needed for low-carbon steel production will depend highly on having a reliable offtake market for producers.

A new green steel industry in Europe

According to T&E, the automotive sector is well positioned to create this demand as it currently consumes 17% of steel in the EU. T&E called on lawmakers to help create a lead market for green steel in Europe by setting targets for carmakers to use an increasing amount of it in new cars starting in 2030.

Alex Keynes, cars policy manager at T&E, stated: “For less than a tire change, Europe can build a green steel industry. The extra cost will be negligible, and in time, it will be cheaper than conventional steel. But we first need lawmakers to kick start the shift to low-carbon steel in the automotive industry.”

The report finds that Europe will be able to produce up to 172 Mt of low-carbon steel a year by 2030, based on Ricardo’s tracking of production announcements. This will be more than enough to meet the automotive sector’s total steel demand, which consumed 36 Mt in 2022. The research also finds a shift to lightweight will decrease the use of steel in the car sector in the next decade.

Car industry as market leader

T&E said at least 40% of steel in new cars should be required to be green by 2030, rising to 75% in 2035 and 100% in 2040. Carmakers should be given an average target that can be met across all their new cars, allowing them to absorb the initial cost via premium models.

This target can be introduced via the EU End-of-life Vehicles or ELV regulation, which is currently being revised by lawmakers.

Alex Keynes concluded: “The automotive sector is the second biggest consumer of steel and well positioned to be a lead market for green steel in Europe. The relatively high value of cars, especially premium brands, means they can absorb the short-term green premium of low-carbon steel.”


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