Towards Carbon Neutral Steelin Japan
Learning from the Latest Trends
in the European Union

December
2021
Copyright © 2021
Renewable Energy Institute. All Rights Reserved

Table of Contents
1. Introduction: (slides 2-5)

Why decarbonizing steel is key for a 2050 carbon neutral Japan, and opportunities to learn from the EU

2. The European Union’s Steel Decarbonization Leadership: (slides 6-13)

Important developments related to steel decarbonization in the EU

3. Steel Decarbonization Technological Options: (slides 14-21)

Advantages and drawbacks of the different steel decarbonization technologies

4. Conclusion: (slides 22-23)
Summary

Annexes: (slides 24-27)

COP26, International initiatives, current Japanese steel production assets

Lists of Acronyms and References: (slides 28-31)

Disclaimer:
Although the information given in this Info Pack isthe best available to the authors at the time,
Renewable Energy Institute cannot be held liable for
its accuracy and correctness.

Acknowledgements:
Renewable Energy Institute would like to thank the members of Agora Energiewende, and of its program Agora Industry, forparticipating in information exchange meetings and sharing feedbacks & insights this Info Pack has greatly benefited from.
Renewable Energy Institute would also like to thank BloombergNEF for authorizing the use of some of its valuable data and information.
Copyright © 2021 Renewable Energy Institute. All Rights Reserved

1Part 1Introduction

Copyright © 2021 Renewable Energy Institute. All Rights Reserved2Decarbonizing Steel: Key for a 2050 Carbon Neutral Japan•

October 2020, Japan announced it is pursuing carbon neutrality by
2050.

•

Of all the manufacturing industries in Japan, steel is the industry
with largest greenhouse gas (GHG) emissions, making it a toppriority for the country’s decarbonization.

•

The challenge to decarbonize steel is that this industry requires
high-temperature heat and often still relies on coal – a major
source of GHG emissions, as reducing agent in blast furnace (BF)
notably.

•

In recent years, however, progress towards steel decarbonization
has accelerated around the world, and especially in Europe.

•

Following Japan government’s decarbonization agenda andwitnessing some of its overseas peers’ pioneering initiatives tobecome carbon neutral by 2050, the Japanese steel industry
recently reacted by advancing its decarbonization target from 2100
to 2050, but many important decisions remain to be made, someof them quite soon.

•

Japan Energy-related CO2 Emissions Breakdown 2019
About 15% of Japan’s total emissions came from the steel
industry (allocated emissions)

Iron＆Steel
155 Mt-CO2eq
40%

Reference: NEIS

Japan Steel Industry Final Consumption Breakdown 2019

（Including private power and steam generation)

In this context, and with this Info Pack dedicated to carbon neutral
steel – “Learning from the Latest Trends”, Renewable Energy
Institute aims at actively contributing to the ongoing debate
around steel decarbonization in Japan.
Copyright © 2021 Renewable Energy Institute. All Rights Reserved

Reference: METI Energy Statistics
3

Japan Needs to Catch up with the EU•

Ranking #2 and #4, respectively, the European Union (EU)and Japan are among the world’s largest producers of steel.
Decarbonization of these markets will have global impacts.

•

Until now, the EU has often and in many ways moved fasterand more ambitiously than Japan when it comes to decisive
climate & energy actions[See the charts on the right-hand side of this slide, and the table
Selected Key Climate & Energy Policy in the EU and Japan (chronologicalorder) on next slide.]•

As a result, the EU has taken the global leadership for
decarbonization, including that of steel. As of Autumn 2021,
42% of the world’s announced new low-carbon steelmaking
projects* were located in the EU (based on project
capacity), which is all the more remarkable that the EU
accounted for 8% of the world’s steel total production in
2019. The European leadership should thus inspire Japanesestakeholders.

EU ETS Price*Projects which can achieve at least 66% CO2 emissions reduction
compared to conventional BFs.
References: World Steel Association( 1), BP, LeadershipGroup for Industry Transition, and Sandbag

Copyright © 2021 Renewable Energy Institute. All Rights Reserved4Selected Key Climate & Energy Policy in the EU and Japan (chronological order)
European UnionJapan

2005: Start of the EU Emissions Trading System (ETS). As of December 8, 2021, €89.60(¥11,555*) per ton of carbon dioxide (CO2).
2007: EU 2020 climate & energy package proposal. Integrates for the first time targets forrenewable energy (RE) [i.e., 20% of total energy] and energy efficiency [i.e., saving 20% ofenergy consumption] to enable a GHG emissions reduction of 20% by 2020 compared to1990 (24% achieved in 2019, latest year for which data is available).
2014: First proposed framework for a 2030 competitive, secure and low-carbon EU
economy. Includes the targets of reducing GHG emissions by 40% compared to 1990, further
increasing the share of RE [i.e., 27%] and improving energy efficiency [i.e., 27%].

2007: 2020 GHG emissions reduction target set. 25% compared to 1990.
2012: Tax for global warming countermeasures introduced for all fossil fuel uses. Currently¥289 (€2.24*) per ton of CO2.
2013: After the Fukushima Daiichi nuclear accident, 2020 GHG emissions reduction target
revised to 3.8% compared to 2005 (i.e., 3.1% increase compared to 1990). Submitted to theUnited Nations Framework Convention on Climate Change (UNFCCC) for the Conference of
the Parties (COP) 19.
2014: 2030 GHG emissions reduction target set: 26% compared to 2013. Submitted to the
UNFCCC as Intended Nationally Determined Contribution (INDC) in 2015. 4th Strategic Energy
Plan set the share of RE in electricity generation at 22-24% for 2030.
2017 (1): 5th Strategic Energy Plan keeps the 2030 GHG emissions reduction & RE target
unchanged. Submitted to the UNFCCC as Nationally Determined Contribution (NDC) in 20202018 (1): 2030 RE and energy efficiency targets increased [i.e., 32% and 32.5%, respectively].

2017 (2): Hydrogen Strategy. Sets various H2 introduction targets (production, cost…) for
2030 and beyond. Transition to carbon-free hydrogen in the future, but no preference is given
to green H2. The 2020 Green Growth Strategy brings additional details.

2018 (2): Vision for a climate-neutral EU by 2050. To limit global temperature increase to
1.5°C (Paris Agreement’s goal – 2015), the EU recognizes that it needs to reach net zero GHG
emissions by 2050 – this vision outlines how the EU could realize its ambition (adopted into
law in 2021 “European Climate Law”).

2019: Long-term Strategy under the Paris Agreement. Proclaims a “decarbonized society” as
its ultimate goal to be accomplished as early as possible in the second half of this century.
Sets a GHG emissions reduction target of 80% by 2050.

2020 (1): Hydrogen strategy for a climate-neutral EU. Identifies RE based (“green”) hydrogen(H2) as a key enabler for the EU to reach carbon neutrality. Sets the objectives of 40 gigawatts(GW) of electrolysers and 10 million tons (Mt) of green hydrogen production by 2030.
2020 (2): Proposal to raise the EU’s 2030 GHG emissions reduction goal to 55% (adopted in2021).
References: REI created based on governmental documents

2020: Carbon neutrality objective announced. Adopted in the revision of the Global
Warming Law in 2021.
2021: GHG emission reduction target for 2030 raised to 46% of 2013 level. Submitted to the
UNFCCC for COP26. 2050 carbon-neutral target adopted in the Act on Promotion of Global
Warming Countermeasures. The 6th Basic Energy Plan sets a target of 36-38% for RE
electricity in 2030.

Copyright © 2021 Renewable Energy Institute. All Rights Reserved*Exchange rate: €1 = ¥128.96 (December 8, 2021) 5

Part 2The European Union’s
Steel Decarbonization Leadership

Copyright © 2021 Renewable Energy Institute. All Rights Reserved

6Why and How Is the EU Leading Steel Decarbonization - Summary
Key Points:• Building upon its advanced decarbonization policies; early adoption of ambitious GHG emissions reduction, RE
and energy efficiency targets, as well as an effective carbon pricing mechanism and – more recently – of acarbon neutral compatible hydrogen strategy, the EU has put together many of the enabling conditions
required for steel decarbonization.
Condition #1

Cost competitive RE – 38% in the

EU in 2020, projected to increase to
81-85% by 2050

Condition #2+

Meaningful carbon prices to be
applicable to the steel industry from 2026
(decided in 2021, and understood since
the inception of the EU ETS) – €89.60 per

Condition #3+ Expanding green H

2 – targets of

40 GW of electrolysers and 10 Mt ofgreen H2 production by 2030

ton of CO2 as of December 8, 2021

• Thanks to this favorable framework, forward thinking stakeholders both on the supply and demand sides
have become quite dynamic to adopt decarbonized steel:- On the supply side; Decarbonized steel manufacturing projects are multiplying and being scaled up, and- On the demand side; The automotive industry as well as other industries have begun to move towards green
steel procurement.
References: European Commission (1) & (2) and Sandbag

Copyright © 2021 Renewable Energy Institute. All Rights Reserved

7

EU Steel Decarbonization Vision- Steel is capable of being one of the first hard-to-abate sectors to produce green products.
• As a part of its New Industrial Strategy, the European Commission published a major
working document “Towards Competitive and Clean European Steel” in May 2021. This
document describes the EU’s steel decarbonization vision, which key points are:
- Steel is a vital material for a modern, industrialized economy,- Production of low-carbon steelmaking requires radical changes.
- Low-carbon solutions commercial roll-out is expected around 2030, yet ambitious plans
are necessary today.
- Engaged in a race against time because 2050 is just one investment cycle away and thelarge majority of BFs needs to be replaced in the coming decade (according to Agora

Energiewende, in the EU 70% of BF capacity will reach the end of its lifetime before 2030 andrequire reinvestment), the next five years are thus crucial.

- Most low-carbon steel production pathways are not technologically mature, and it is not
yet clear which process will dominate in the future.
IMPORTANT UPDATE

Since the publication of the document referred to hereinabove, empirical developments have demonstrated that among low-carbon
steel production pathways steel recycling (EAF) is mature and (green) hydrogen-based direct reduction - electric arc furnace (H2DREAF) is close to maturity with several commercial-scale projects to come online in the EU around 2025 already.
References: European Commission (3) and Leadership Groupfor Industry Transition

Copyright © 2021 Renewable Energy Institute. All Rights Reserved

8

EU Steel Decarbonization Policies
Fundamentally, the EU steel decarbonization policies combine financial incentives and regulations.

Climate change measures are a major pillar for steel decarbonization. In addition to financial support, the abolition of free emission allowances under
the EU-ETS will result in a carbon price being applied to the steel industry and that will contribute funding the Innovation Fund.

Supporting policies

Selected main initiatives and brief description
Recovery and Resilience Facility; Makes €672.5 billion (2021-2023) available in loans and grants to support reforms and investments undertaken by
Member States. An unprecedented opportunity to accelerate the decarbonization of heavy industries like steel.

Funding and budget
programs

COMBINATION

Regulatoryenvironment

Innovation Fund; Provides €27-36 billion (assuming funding from the EU ETS as follows: auctioning of 450 million of emissions allowances and prices of€60-80 per ton of CO2) in the period 2021-2030 for the demonstration of innovative low-carbon technologies in multiple sectors, including energy-intensive
industries such as steel. In addition, the European Commission has proposed to introduce carbon contracts for differences that are funded by the
Innovation Fund to also cover the operating expense of low-carbon projects.
Clean Steel Partnership; Supports with up to €700 million research and innovation activities from the pilot to the demonstration phases of breakthroughtechnologies for carbon neutral steel production.
EU taxonomy for sustainable investments; Includes steel production to incentivize manufacturing environmental improvements.
EU ETS (“polluter pays principle”); Covers the steel industry and puts a price on carbon emissions. Free emission allowances for EU steel producers will bephased out from 2026 to 2035 (10% reduction per year) – decided in 2021 and understood since the inception of the EU ETS. As of December 8, 2021, theprice of an allowance was €89.60 per ton of CO2. The EU ETS partly funds the Innovation Fund as described above.
CBAM proposal; Covers steel with the aim of reducing carbon leakage risks by ensuring that carbon emissions from imports are reflected in prices. It is analternative to the EU ETS free emission allowances.
Industrial Emissions Directive; Regulates GHG emissions from steel production by setting standards imposing emissions prevention or reduction
techniques (mandatory transposition / applicable penalties determined by Member States).
Circular Economy Action Plan; Identifies steel as one of the priority product/material groups with untapped potential for circularity thanks to its
characteristics as a naturally long-lasting and durable product, well adapted for recycling, reuse and remanufacture.

References: European Commission (3) and Sandbag

Copyright © 2021 Renewable Energy Institute. All Rights Reserved

9EU Main Steel Decarbonization Pathways: Approach and Reality•

EU Main Planned Pathways:-

The EU considers all main technological options for steel decarbonization: EAF, H2DR-EAF, and blast furnace - basic
oxygen furnace combined with carbon capture, utilization and/or storage (BF-BOF+CCUS).
Economic and technological progresses will determine the winner(s).
In general, the EU prioritizes “green” H2 & electricity because renewable energy has until now outperformed, andis expected to keep outperforming, nuclear power and carbon capture and storage (CCS) related technologies todeliver GHG emissions reductions.

•

EU Main Empirical Developments:-

With the ongoing reinvestment cycle and thanks to the policy
framework in place, investments in new low-carbon steelmaking
projects* are increasingly announced across the EU: 36 Mt.
So far, on the one hand EAF and DR-EAF are the winners of thesteel clean transition with planned industrial-scale commissioning
in the 2020s. [natural gas may first be used in DR-EAF, but the end-goal is--

Low-Carbon Steel Projects Announcements to be
Built in the EU before 2030 (capacity in Mt)

to use green H2.]

On the other hand, not a single project for new BF-BOF+CCUS has
been announced.

*Projects which can achieve at least 66% CO2 emissions reduction compared toconventional BFs.

References: Agora Energiewende (2)References: European Commission (3) and Agora Energiewende (2)Copyright © 2021 Renewable Energy Institute. All Rights Reserved

10Decarbonized Steel Supply (1)•In Europe in recent years, some major steel manufacturers have made important announcements in favor of carbon
neutral steelmaking by 2050: For examples, Tata Steel Europe (October 2018), ThyssenKrupp Steel Europe (July 2019),
and ArcelorMittal (September 2020).

• To pave the way towards their mid-century objectives,
these steel manufacturers have also announced
intermediate 2030 GHG emissions reduction targets.
• To replace existing BF-BOF, new pioneering projects,
primarily focusing on H2DR-EAF, varying by scale(including industrial-scale) are now advanced across theEU, with expectations of commissioning within the
coming years[See next slide.]

European Steel Manufacturers Intermediate Goals Towards
Carbon Neutrality

Selected steel manufacturers

Intermediate 2030 GHG
emissions reduction targets

ArcelorMittal

25% reduction of global carbon
emissions intensity / 35% in Europe

SSAB

26% of direct and indirect emissions(and fossil free by 2045)(headquarter country: Luxembourg)(headquarter country: Sweden)

Tata Steel Europe(headquarter country: United Kingdom)

ThyssenKrupp Steel Europe(headquarter country: Germany)

30% in the United Kingdom and
40% in the Netherlands
30% from production andoutsourced energy• A significant development has been the announcement by Tata Steel Europe in September 2021 that the company
after considering BF-BOF+CCUS (including the alternative ironmaking technology “Hisarna process”), finally decided toonly focus on H2DR-EAF.
*A smelting reduction process with two directly coupled process stages in which the production of liquid pig irontakes place. This process is more energy efficient and has a lower carbon footprint than conventional BF-BOF.

References: ArcelorMittal (1), SSAB (1), Tata Steel Europe (1) &(2) and ThyssenKrupp Steel Europe (1)Copyright © 2021 Renewable Energy Institute. All Rights Reserved

11Decarbonized Steel Supply (2)Selected pioneering new low-carbon steelmaking projects* in Europe (alphabetical order):Project

Country

Steelcompany

Innovativetechnology

Steel annual
production (Mt)

Commissioning
year

Financial information, if identified

Boden

SwedenH2 Green Steel

H2DR-EAF

5 Mt (by 2030)

by 2024– not identified –Dunkerque

FranceLiberty Steel

H2DR-EAF**

2 Mt– not identified –– not identified –Gent

Belgium

ArcelorMittal

H2DR-EAF**

2.5 Mtby 2030€1.1 billion of funding support [Belgian and Flanders
governments]

Gijón

Spain

ArcelorMittal

H2DR-EAF**

2.3 Mtby 2025€1 billion of funding support [Spanish government]

H2 Hamburg

Germany

ArcelorMittal

H2DR-EAF**

initially 0.1 Mt thenover 1 Mt (by 2030)

by 2025€55 million of funding support (half of the total capital
expenditure required) [German government]

HYBRIT

SwedenSSAB

H2DR-EAF

initially 0.01 Mt(started in 2020)

from pilot tocommercial by 2026

€53 million of funding support [Swedish government]

tkH2Steel

Germany

ThyssenKrupp

H2DR-EAF**

initially 0.4 Mt then3 Mt (by 2030)

by 2025– not identified –*Projects which can achieve at least 66% CO2 emissions reduction compared to conventional BFs.
**Natural gas may be used temporarily, but the end-goal is to use green H2.
References: Agora Energiewende (3), ArcelorMittal (2), (3) & (4), H2 Green
Steel, Liberty Steel, SSAB (2) and ThyssenKrupp Steel Europe (2) Copyright © 2021 Renewable Energy Institute. All Rights Reserved

12Decarbonized Steel Demand
In recent months, major European industries have made important announcements
directly or indirectly in favor of decarbonized steel (i.e., investments in decarbonizedsteelmaking and/or procurement of decarbonized steel):•

Car manufacturers are at the forefront of this shift:-

March 2021, BMW announced it is investing in an innovative method for decarbonized steel
production developed by Boston Metal (to be industrialized by mid-decade).
April 2021, Volvo announced it is collaborating with SSAB, a steel producer participating in the
HYBRIT project, to commercialize the world’s first vehicles to be made of decarbonized steel(manufacturing of the first concept vehicles with steel using H2 will start in 2021 already).
April 2021, Volkswagen announced it is working to decarbonize its supply chain, including steel
production.
May 2021, Daimler (Mercedes-Benz) announced it is taking an equity stake in H2 Green Steel, a
producer of decarbonized steel (green steel in various vehicle models will be launched as earlyas 2025).

-•

In the framework of the Climate Group’s SteelZero initiative, the building industry has also become more active(e.g., Landsec, Mace…) as well as the power company Ørsted with announced commitments to 100% net zero steel
by 2050 at the latest. (intermediate target of 50% by 2030 at the latest).

•

Beyond these sectors, some manufacturers of domestic appliances are also starting to procure decarbonized steel(e.g., Miele, Kaldewei…).

References: BMW, Daimler(Mercedes-Benz), Volkswagen, Volvo and Climate Group
Copyright © 2021 Renewable Energy Institute. All Rights Reserved

13Part 3
Steel Decarbonization Technological Options

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14

Main Technological Options for Steel Decarbonization – Simplified Summary
Main TRADITIONAL approaches
Steel products

Recycled

Technologies

electric arc
furnace(EAF)

natural gas-based
direct reduction electric arc
furnace(NGDR-EAF)

blast furnace basic oxygen
furnace(BF-BOF)electric arc
furnace(EAF)

hydrogen-based
direct reduction electric arc
furnace(H2DR-EAF)

blast furnace - basic
oxygen furnace
combined withcarbon capture,utilization and/or
storage(BF-BOF+CCUS)

Key inputs

electricity

natural gas andelectricity

fossil fuels,
especially coal

decarbonizedelectricity

decarbonizedhydrogen andelectricity

fossil fuels and
CCUS

low

intermediate(can become low byswitching to H2)

highnear zeronear zero

low, if additional
actions are
implemented

maturematurematurematurecoming years

uncertain

GHG emissions
Maturity

VirginMain DECARBONIZATION approaches
Recycled

VirginCarbon neutral steel requires: Decarbonized electricity (EAF) / decarbonized hydrogen and electricity (H2DR-EAF) / maximum
capture and permanent storage of GHG emissions as well as carbon offsets and/or direct air capture (BF-BOF+CCUS).
Copyright © 2021 Renewable Energy Institute. All Rights Reserved

15

Comparison of Conventional and Decarbonized Processes• Conventional BF-BOF process results in massive CO2 emissions: 1.8 to 2.9 t-CO2 per 1 t of crude steel, as the reduction
process of iron ore is based on coke made from coal, as well as sintering, coking and converting. Partial DR by hydrogenin the BF and use of exhaust gas can reduce some of the emissions, but CCS is a necessity.
• Emissions from DR process using natural gas are half those of BF-BOF, and can be zero if decarbonized hydrogen
replaces natural gas.

©Carbon2021TrustRenewable
Reference: Renewable Energy Institute, figures of CO2 emission of BF-BOF areCopyrighttaken from(2011) Energy Institute. All Rights Reserved

16

Focus on EAF: Ready and Set to Increase
Brief Explanations:• A scrap EAF powered by decarbonized electricity enables CO2
emission-free steel recycling. It is the most straightforward way forsteel decarbonization.

EAF Shares in Major Countries

Opportunities:•

This technological option is mature and cost competitive, and it willfurther benefit from the expansion of cheap RE electricity.

Challenges:•

This option is limited by a few key factors related to scrap availability– finite supply, prices and quality.

[In Japan, if the scrap steel that is currently exported was directed to domestic
demand 2/3rds of the current demand could be covered. Also, regarding quality, it isbeing improved by domestic companies as demonstrated by the successful trial
production of structural high-tensile steel plates for automobiles in 2013 already.］•

Low in China and Japan

Depending on countries; Abundant and cost competitive RE
electricity. As RE electricity quickly expands by outcompeting fossil
and nuclear power in most parts of the world this issue should
become less and less important.

References: BloombergNEF, International Renewable Energy Agency,
Ministry of Environment and Tokyo Steel
Copyright © 2021 Renewable Energy Institute. All Rights Reserved

Reference: Bureau of International Recycling
17

Focus on H2DR – EAF: The Most Promising Option
Brief Explanations:•

One option that many EU steelmakers pursue is to build DR-EAF
plants that are initially operated with natural gas. These plants
are 100% H2-ready and once clean H2 becomes available, it can
gradually replace the natural gas in the plant without any retrofit.

Opportunities:••

Developments:

As of June 2021, over 20 projects wereadvanced, mainly in Europe (e.g.,
HYBRIT, H2 Hamburg…).

This technological option is mature and can be deployed now,even if sufficient amounts of clean H2 are not available yet.
It avoids a carbon lock-in and H2 can be phased-in, as it becomes
available.

Challenges:••

There is currently an economic gap between BF-BOF and H2DREAF (policy support instruments are needed in the 2020s, tobridge that gap).
Deployment of new infrastructure for H2 production anddistribution will be required but is not a precondition for the firstphase with natural gas.

References: BloombergNEF, International Renewable Energy Agency
and Leadership Group for Industry Transition
Copyright © 2021 Renewable Energy Institute. All Rights Reserved

Source: Agora Energiewende (1)18Example of H2DR-EAF Project: HYBRITBrief outline:

Key stakeholders include SSAB, LKAB and Vattenfall. Test
operations began in September 2020. Already succeeded in
producing fossil fuel free steel. Aims to start commercial
operation by 2026.

Project scheme of HYBRIT

Goal:

To create a completely fossil-free value chain from mine tofinished steel, with fossil-free pellets, electricity and H2.

Simple description of the process:• Fossil-free iron ore pellets are produced from bio-oil instead of coaland petroleum-based oil.
• Fossil-free electricity is generated from low-carbon technologies (e.g.,
RE; hydro and wind) and produces fossil-free H2 (the chemical reducing
agent instead of coke in a BF) thanks to electrolyzers that is then used
to obtain DR (i.e., “sponge iron” in the illustration) from fossil-freepellets.
• Fossil-free steel is produced from DR and scrap in the EAF that is
powered by fossil-free electricity.

The world’s first vehicle made with fossil-free steel

Reference: International Renewable Energy Agency
Copyright © 2021 Renewable Energy Institute. All Rights Reserved

Source: HYBRIT 19

Focus on BF-BOF+CCUS: The Most Questionable Option
Brief Explanations:•

It is possible to reduce the emissions intensity of BF-BOF by advancing
alternative ironmaking processes combined with CCUS technologies.
Alternative ironmaking technologies refer to the HISarna process(instead of BF) and top gas recycling (in combination with BF) for
examples. H2 may also be injected into BF, but some coal use remains.

Developments:
As of Autumn 2021, no announcement in favor of low-carbon
steel based on CCS in combination with coal-based
steelmaking technologies had been made.

Opportunities:•

This technological option could be carbon-free, if carbon offsets
and/or direct air capture are also implemented.

Challenges:•••

This option has not reached maturity yet, technological progress istaking place.
Some preliminary cost projections show EAF and DR-EAF (either
natural gas based + carbon offset, or H2 based) having a competitiveedge over BF-BOF+CCUS. (For more information, please refer to thenext slide dedicated to the costs of the different decarbonization
technological options.)
Sufficient GHG emissions storage capacity must be identified andemissions captured need to be permanently stored.

0
Source: Agora Energiewende (1)References: BloombergNEF and International Renewable Energy Agency
Copyright © 2021 Renewable Energy Institute. All Rights Reserved20Economics of Main Technological Options for Steel Decarbonization

The molten oxide electrolysis (MOE) technological option, based on directelectrification of primary steelmaking through an electrolysis process,indicated in this chart (not elsewhere presented in this Info Pack) could be
economically promising, but its market readiness lags behind that of othertechnologies.

Operational expenditures (e.g., energy and reductants,
raw materials…) are key components impacting thecost of steel. In addition, a carbon price helps bridging
the gap between polluting and clean technologies.

• Recent cost projections for decarbonized steel show that in 2050 EAF and DR-EAF (either
natural gas based + carbon offset, or H2 based) technologies could:
o Be competitive with today’s technologies, ando Outcompete BF-BOF+CCUS technologies.

Reference: BloombergNEF

Copyright © 2021 Renewable Energy Institute. All Rights Reserved

21Part 4
Conclusion

Copyright © 2021 Renewable Energy Institute. All Rights Reserved

22Summary• In the past few years, steel decarbonization has accelerated across the world, and it is especially dynamic in the EU thanks
to a combination of political support (including funding and regulation) and enabling conditions.
• Forward-thinking stakeholders both on the supply & demand sides deliver economic and environmental progress
together, by advancing technological innovation for the former, and new business models for the latter.
• Among steel decarbonization technological options, EAF (steel recycling) and DR-EAF (new steel) increasingly appear as
the most likely important solutions. In the case of DR-EAF, natural gas could be used temporarily to start with now, but theend-goal should be to use H2. In both cases, availability of cost competitive decarbonized electricity and H2 will be critical.
• Progress is taking place fast, and one of the challenges will be to go from demonstration to commercial projects. The
coming years should start delivering significant full-scale commissioning.
• Also in Japan, there are many BFs in need of refurbishment,
but the transition to low carbon projects* has not yet beenannounced, with the exceptions of a few EAF projects**.
Once refurbished or replaced, there are few opportunities for
asset reinvestments until 2050. Investment decisions need tobe made as early as the 2020s to change gears towards
decarbonization.
* Projects which can achieve at least 66% CO2 emissions reduction compared to conventional BFs.
** As of December 2021, three EAF projects have been announced.
*** Existing BFs that have passed 20 years since their last refurbishment.

77%

Reinvestment Cycle of BFs in Japan***Copyright © 2021 Renewable Energy Institute. All Rights Reserved

Reference: Agora Energiewende (2)23Annexes

Copyright © 2021 Renewable Energy Institute. All Rights Reserved

24

COP26 Glasgow Breakthrough Agenda: Accelerate Decarbonization of Steel Sector
The Breakthrough Agenda, a high-level international
cooperation initiative, was launched at COP26 held in
November 2021. The first of these agendas, the "Glasgow
Breakthrough Agenda," focuses on sectors that areconsidered difficult to decarbonize, such as steel.

Steel Breakthroughs Overview
Focusing on innovation, procurement, standardized investment, and crosscutting initiatives, the report seeks to coordinate various international
initiatives to further promote international cooperation.

The agenda for steel includes 26 countries, including Japan,
and aims to achieve "efficient and near-zero emission
production in all regions by 2030, so that near-zero emission
steel becomes the preferred choice for the global market.
The definition of near-zero emission steel is a reduction of
90% or more compared to conventional blast furnace andconverter production, including the use of scrap iron.
A number of international initiatives have recently beenlaunched to decarbonize steel, and the Agenda seeks tostrengthen the coordination of these initiatives to achieve asolution.

References: UNFCCC, World Steel Association

Copyright © 2021 Renewable Energy Institute. All Rights Reserved

Source: UK government

25

International Initiatives for Steel Industry Decarbonization: Launching Rush
Targeting the steel industry and other high-emission sectors that are said to be "difficult to deal with" as the "next frontier".
Although the goal is to decarbonize by 2050, the focus of activities will be on the next 10 years, with the period up to 2030 being the most important.
Diverse initiatives are promoted: not only focusing on production, but also on demand, investment, and supply.
These are formed by a collaborative body of diverse actors, including governments, companies, investors, NGOs, and academics.
Initiative
Mission Possible Partnership
Net-Zero Steel Initiative

Organizer, partner

Mission, activities

Funding partners; Energy Transitions Commission, RMI, We Mean BusinessCoalition, World Economic Forum

Form and promote a community of industry CEOs, customers, and suppliers todecarbonize 7 high-emission industries, including steel. Market zero-carbon primary
steelmaking technology in the next 10 years, promote scrap-based manufacturing, andavoid building high-carbon emission facilities after 2030.

Leadership Group for
Industry Transition (LeadIT)

Launched by the governments of Sweden and India at the 2019 UN Climate
Action Summit, supported by the World Economic Forum, with 19 members
from 16 countries.

LeadIT members must make progress in low-carbon energy-intensive industries withthe goal of zero emissions by 2050.

Clean Energy Ministerial（CEM)/
Industrial Deep decarbonization
initiative

A public-private collaborative initiative of CEM, an international forum formedby 29 countries including Japan. Led by UK and India, with participation by
Promote public-private procurement with the aim of creating a market for low-carbon
Germany, Canada, and UAE, in collaboration with MI, LeadIT, IRENA, and the steel and cement in collaboration with UNIDO.
World Bank.

First Movers Coalition (FMC)

A Public-Private Partnership between the U.S. Department of State and theWorld Economic Forum. Lead by U.S. Special Envoy for Climate Change, John
Kerry.

By 2030, increase initial demand for low-carbon products and services and expand
solutions in four high-carbon emission sectors, including steel .... Members will ensurethat at least 10% of steel procurement is near zero emission steel by 2030.

International initiative by Climate Group, organizer of RE100, 15
companies/organizations including Ørsted.

Bring together companies and organizations committed to making steel sourcing,selection, and storage 50% net zero steel by 2030 and 100% net zero steel by 2050.
Send a strong signal from the demand side for a market and policy shift.

Mission Innovation/
Industry Mission

An international initiative involving 22 countries and the European
Commission at the same time as the Paris Agreement, with the launch of themore action-oriented 2.0 in 2021 and the launch of the Net Zero Industries
Mission.

Promote research, development, demonstration, and investment to make clean energy
affordable, attractive, and accessible to all over the next decade.．

Responsible SteelA Multi-Stakeholder Standard and Certification Initiative for the Steel Industry. Announced the Responsible Steel Standard V.1.1, which will apply to production and
BlueScope Steel, Founded by ArcelorMittal
processing in 2021, with the mission of achieving net zero in the steel industry in 2050．

Climate Group’s Steel Zero

Reference: Prepared by the REI based on the websites of each initiative

Copyright © 2021 Renewable Energy Institute. All Rights Reserved26Current Japanese Steel Production Assets – Overview
•
•
•
•
•

As of December 2020, 24 BFs were in operation at 12 sites across the country.
Due to consolidation, only three companies (Nippon Steel, JFE and KOBELCO) have BFs.
Total capacity of BFs in Japan accounts about for 83 Mt, the fourth largest in the world.
EAF capacity is considerably large with 37 Mt, and stable.
Currently, there is no DRI plant in Japan.

World top-10 countries in BF capacity:

BF and EAF capacities in Japan:(as of December 2020)

References: Global Steel Tracker, except for Japan (Ministry of Economy, Trade andIndustry) and EU-28 and Germany (Agora Energiewende (2))

Copyright © 2021 Renewable Energy Institute. All Rights Reserved

Reference: METI 2021

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Lists of Acronyms and References

Copyright © 2021 Renewable Energy Institute. All Rights Reserved

28

List of Acronyms
BF: Blast furnace
BF-BOF: Blast furnace - basic oxygen furnace
BF-BOF+CCUS: Blast furnace - basic oxygen furnace combined with carbon capture, utilization and/or storage
BOF: Basic oxygen furnace
CBAM: Carbon Border Adjustment Mechanism
CCS: Carbon capture and storage
CCUS: Carbon capture, utilization and/or storage
CO2: Carbon dioxide
COP: Conference of the Parties
DR: Direct reduction
DR-EAF: Direct reduction - electric arc furnace
EAF: Electric arc furnace
ETS: Emissions Trading System
EUROFER: European Steel Association
GHG: Greenhouse gas
GW: Gigawatt
H2: Hydrogen
H2DR-EAF: Hydrogen-based direct reduction - electric arc furnace
INDC: Intended Nationally Determined Contribution
Mt: Million tons
MWh: Megawatt-hour
NDC: Nationally Determined Contribution
NGDR-EAF: Natural gas-based direct reduction - electric arc furnace
RE: Renewable energy
UNFCCC: United Nations Framework Convention on Climate Change
Copyright © 2021 Renewable Energy Institute. All Rights Reserved

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List of References (1)Agora Energiewende (1): Global Steel at a Crossroads (November 2021).
https://static.agora-energiewende.de/fileadmin/Projekte/2021/2021-06_IND_INT_GlobalSteel/A-EW_236_Global-Steel-at-a-Crossroads_WEB.pdf
Agora Energiewende (2): Global steel transformation tracker (accessed December 6, 2021).
https://www.agora-energiewende.de/en/service/global-steel-transformation-tracker/
Agora Energiewende (3): Breakthrough Strategies for Climate-neutral Industry in Europe: Policy and Technology Pathways for Raising EU Climate Ambition (April 2021).
https://static.agora-energiewende.de/fileadmin/Projekte/2020/2020_10_Clean_Industry_Package/A-EW_208_Strategies-Climate-Neutral-Industry-EU_Study_WEB.pdf
ArcelorMittal (1): ArcelorMittal publishes second group climate action report – July 29, 2021 (accessed December 6, 2021).
https://corporate.arcelormittal.com/media/press-releases/arcelormittal-publishes-second-group-climate-action-report
ArcelorMittal (2): ArcelorMittal signs letter of intent with the Governments of Belgium and Flanders, supporting €1.1 billion investment in decarbonisation technologies at its flagship Gent plant – September 28, 2021
(accessed December 6, 2021).
https://corporate.arcelormittal.com/media/press-releases/arcelormittal-signs-letter-of-intent-with-the-governments-of-belgium-and-flanders-supporting-1-1-billion-investment-in-decarbonisation-technologies-atits-flagship-gent-plant
ArcelorMittal (3): ArcelorMittal signs MoU with the Spanish Government supporting €1 billion investment in decarbonisation technologies – July 13, 2021 (accessed December 6, 2021).
https://corporate.arcelormittal.com/media/press-releases/arcelormittal-signs-mou-with-the-spanish-government-supporting-1-billion-investment-in-decarbonisation-technologies
ArcelorMittal (4): German Federal Government commits its intention to provide €55 million of funding for ArcelorMittal’s Hydrogen DRI plant – September 7, 2021 (accessed December 6, 2021).
https://corporate.arcelormittal.com/media/news-articles/german-federal-government-commits-its-intention-to-provide-55-million-of-funding-for-arcelormittal-s-hydrogen-dri-plantBloombergNEF: Decarbonizing Steel: Technologies and Costs (August 2021) [subscription required].
BMW: BMW Group invests in innovative method for CO2-free steel production – March 12, 2021 (accessed December 6, 2021).
https://www.press.bmwgroup.com/global/article/detail/T0327511EN/bmw-group-invests-in-innovative-method-for-co2-free-steel-production?language=en
BP: Statistical Review of World Energy 2021 (July 2021).
https://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.html
Bureau of International Recycling: World Steel Recycling in Figures 2016-2020 (May 2021).
https://www.bir.org/publications/facts-figures/download/821/175/36?method=view
Climate Group: SteelZero members (accessed December 6, 2021).
https://www.theclimategroup.org/steelzero-members
Daimler: From 2025: “Green” steel for Mercedes-Benz – May 27, 2021 (accessed December 6, 2021).
https://www.daimler.com/sustainability/climate/green-steel.html
European Commission (1): A Clean Planet for All: A European Strategic Long-term Vision for a Prosperous, Modern, Competitive and Climate Neutral Economy (November 2018).
https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52018DC0773&from=EN
European Commission (2): A Hydrogen Strategy for a Climate-neutral Europe (July 2020).
https://ec.europa.eu/energy/sites/ener/files/hydrogen_strategy.pdf
European Commission (3): Towards Competitive and Clean European Steel (May 2021).
https://ec.europa.eu/info/sites/default/files/swd-competitive-clean-european-steel_en.pdf
H2 Green Steel: On course for large-scale fossil-free steel production from 2024 (accessed December 6, 2021).
https://www.h2greensteel.com/on-course-for-large-scale-fossil-free-steel-production-from-2024
International Renewable Energy Agency: Reaching Zero with Renewables (September 2020).
https://www.irena.org/publications/2020/Sep/Reaching-Zero-with-Renewables
Leadership Group for Industry Transition: Green Steel Tracker (November 2021).
https://www.industrytransition.org/green-steel-tracker/
Copyright © 2021 Renewable Energy Institute. All Rights Reserved30

List of References (2)Liberty Steel: LIBERTY, Paul Wurth and SHS – Stahl-Holding-Saar to develop major hydrogen-based steel making plant in France (accessed December 6, 2021).
https://libertysteelgroup.com/news/liberty-develop-hydrogen-steel-making-plant/
METI/ANRE ”Total Energy Statistic” (FY2019)https://www.enecho.meti.go.jp/statistics/total_energy/xls/stte_2019b.xlsx
Ministry of Economy, Trade and Industry: Yearbook of Current Production Statistics: Iron and Steel, Non-ferrous Metals, and Fabricated Metals (May 2021).
https://www.meti.go.jp/statistics/tyo/seidou/result/gaiyo/resourceData/01_tekko/nenpo/h2daa2020k.pdf
Ministry of Environment: Japan's first successful trial production of automotive structural steel in an electric furnace – April 25, 2013 (accessed December 9, 2021) (in Japanese).
http://www.env.go.jp/press/press.php?serial=16583
National Institute for Environmental Studies The GHG Emissions Data of Japan (1990-2019)https://www.nies.go.jp/gio/en/aboutghg/index.html
Sandbag: CO2 emission allowance (accessed December 9, 2021).
https://sandbag.be/index.php/carbon-price-viewer/
SSAB (1): Annual Report 2020 (March 2021).
https://www.ssab.com/company/investors/reports-and-presentations#first=10&sort=%40customorder%20descending
SSAB (2): HYBRIT’s world-first pilot plant wins energy agency’s backing (accessed December 6, 2021).
https://www.ssab.com/news/2018/06/hybrits-worldfirst-pilot-plant-wins-energy-agencys-backing
Tata Steel Europe (1): Carbon neutral steelmaking is a major challenge for the steel industry worldwide (accessed December 6, 2021).
https://www.tatasteeleurope.com/sustainability/carbon-neutral-steel
Tata Steel Europe (2): Tata Steel opts for hydrogen route at its Ijmuiden steelworks – September 15, 2021 (accessed December 6, 2021).
https://www.tatasteeleurope.com/corporate/news/tata-steel-opts-for-hydrogen-route-at-its-ijmuiden-steelworks
The Japan Ferrous Raw Materials Association: Annual Ferrous Report, 2021
ThyssenKrupp Steel Europe (1): ThyssenKrupp sets clear targets: Group aims to be climate neutral by 2050 – 30 percent emissions reduction planned for 2030 – July 2, 2019 (accessed December 6, 2021).
https://www.thyssenkrupp.com/en/newsroom/press-releases/thyssenkrupp-sets-clear-targets--group-aims-to-be-climate-neutral-by-2050------30-percent-emissions-reduction-planned-for-2030-12803.html
ThyssenKrupp Steel Europe (2): Electrical hot metal from blast furnace 2.0: ThyssenKrupp presents Federal Economics Minister Altmaier and State Premier Laschet innovative concept for green transformationof Duisburg steel mill – August 28, 2020 (accessed December 6, 2021).
https://www.thyssenkrupp.com/en/newsroom/press-releases/pressdetailpage/electrical-hot-metal-from-blast-furnace-20--thyssenkrupp-presents-federal-economics-minister-altmaier-and-state-premierlaschet-innovative-concept-for-green-transformation-of-duisburg-steel-mill-86635
Tokyo Steel & National Institute of Advanced Industrial Science and Technology: LCA of EAF Routes and Material Flow Analysis of Ferrous (March 2019).
Volkswagen: Way to zero: Volkswagen presents roadmap for climate-neutral mobility – April 29, 2021 (accessed December 6, 2021).
https://www.volkswagen-newsroom.com/en/press-releases/way-to-zero-volkswagen-presents-roadmap-for-climate-neutral-mobility-7081
Volvo: Volvo Group and SSAB to collaborate on the world’s first vehicles of fossil-free steel – April 8, 2021 (accessed December 6, 2021).
https://www.volvogroup.com/en/news-and-media/news/2021/apr/news-3938822.html
World Steel Association (1) Steel Statistical Year Book 2019 Data – November 8, 2021 (accessed December 8, 2021).

https://www.worldsteel.org/
World Steel Association (2), Andrew Purvis: Blog: COP26 - steel in the Glasgow breakthroughs programme
https://www.worldsteel.org/media-centre/blog/2021/COP26-steel-in-the-Glasgow-Breakthroughs-Programme.html

Copyright © 2021 Renewable Energy Institute. All Rights Reserved31 Decarbonizing Japan’s Steel Industry– Info Pack: Learning from the Latest Trends in the European Union –December 2021

 Authors

Romain Zissler Senior Researcher, Renewable Energy InstituteYuko Nishida Senior Manager – Climate Change, Renewable Energy InstituteTakanobu Aikawa Senior Researcher, Renewable Energy InstitutePart of this report uses information through cooperation between REI and Agora Energiewende/Agora Industry.
This cooperation is supported by the Federal Ministry of Economic Affairs and Energy.

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