The steel paradox of decarbonisation

Steel is a critical material and is a structural foundation of the global economy.

- Sue Lyn Stubbs

It is essential in the development of technologies designed to decarbonise the world. From offshore wind platforms to electric vehicle chassis, it is an indispensable component of the clean energy transition. However, it also represents one of the world's largest decarbonisation challenges, with direct operations accounting for around 8% of total global energy system emissions.

As renewable energy infrastructure demand grows, the sector paradoxically becomes both a solution and a problem. The steel value chain contains an overlooked threat to global climate commitments: methane from upstream metallurgical coal extraction. Methane leakage from metallurgical coal production contributes an additional 27% to steel’s near-term climate footprint when measured using a 20-year warming potential (methane is 84 times more powerful than CO2). For investors, it is a balance between supporting the clean energy transition and addressing immediate environmental concerns.

Methane in steel production

Methane emissions are generated from the extraction and production of metallurgical coal, which is used in the production of steel. Roughly 70% of global steel production relies on the use of the Blast Furnace-Basic Oxygen Furnace (BF-BOF). This is where metallurgical coal is transformed into coke (a carbon-rich fuel essential for converting iron ore into molten iron). This process is inherently carbon-intensive, generating approximately two tonnes of CO2 for every tonne of crude steel produced.