Focusing on green steel in cars would raise the unit cost by just 57 euros
Decarbonisation in the automotive sector is one of the neural points of the transition, and it is also among the most politicized topics in recent years. Car emissions account for 13% of Europe’s greenhouse gases generated yearly. The failure to decarbonize this sector in Italy caused the emission budget to grow in 2022. The debate usually focuses on electrification and policy incentives for EVs. However, that is not the only perspective from which to analyze the matter. What solutions could cut the sector’s emissions from a production chain perspective? An answer comes from green steel. Steel produced in electric arc ovens powered by renewable sources, or from green hydrogen with direct reduction processes, has a significant potential. If used in the automotive manufacturing process, it could cut 7 million tons of CO2 per year by 2030, the equivalent of removing 3.5 million diesel and petrol cars from the road. It was calculated by the NGO Transport & Environment in a report published.
Green steel, the other key to decarbonizing the automotive
Green steel is still a niche market, and few plants are capable of producing it on a large scale. The main node is not technology – now ripe – but a shortage of demand. It is precisely here that combining automotive with green steel can lead to a more than positive synergy: The sector accounts for 17% of European steel demand.
The other aspect to consider is cost. Will the switch to green steel increase production costs? Is it sustainable from an industrial point of view? And what impact would it have on consumers? T&E calculates that using low-emission steel would only result in minimal price increases: less than 60 euros per car produced.
“With less than one tyre change, Europe can build a green steel industry. The additional cost will be negligible and in time it will be cheaper than conventional steel,” stresses Alex Keynes, head of T&E’s automotive policies. “But first, we need legislators to start the shift to low-carbon steel in the automotive industry.”
Recalibrating EU industrial policies
The political edge is essential to trigger this transformation. Because the starting conditions are already there. European industry is capable of producing up to 172 million tonnes of green steel per year by 2030, based on projects and plants in operation or announced for the coming years. This is more than enough to cover the needs of the automotive sector, which amounted to 36 million tonnes of steel in 2022.
According to T&E, therefore, a shot at the level of European policies in this area is needed. The NGO introduces several binding requirements to accompany the sector in this gradual transformation. By 2030, producers must use at least 40% green steel, then raise the percentage to 75% by 2035 and 100% by 2040. Each automaker should have an average target, which can be achieved by evaluating the different models produced.