A Climate Club for the Global Steel Industry

The German government has announced that it will initiate an international climate club under its German G7 presidency. The article "A Climate Club to Decarbonize the Global Steel Industry," published in the journal Nature Climate Change, outlines how exactly such a climate club could look like. The team of authors from the Wuppertal Institute includes Dr Lukas Hermwille, Prof. Dr Stefan Lechtenböhmer, Prof. Dr Manfred Fischedick, Annika Tönjes, Clemens Schneider and Wolfgang Obergassel.

So far, most climate club proposals focus on the coordination of carbon pricing and corresponding policy instruments among its members. Non-members, on the other hand, are being targeted with tariffs or similar penalties (carbon border adjustments) to protect their own green industry from unsustainable competition. Instead, the authors now propose to orient a climate club towards the concrete transformation challenges of individual sectors making a specific proposal for the steel industry. Such a club could facilitate the transformation of the steel industry by addressing political, economic and technological uncertainties. "In order to successfully implement the decarbonisation of the steel industry, significant share of the existing fossil fuel-based production facilities will have to be replaced by CO2-free technologies in the next ten years. But these technologies are not yet widely available," emphasises Lukas Hermwille, lead author of the article and Senior Researcher in the Global Climate Governance Research Unit at the Wuppertal Institute. Moreover, these technologies require new infrastructures as well as significant amounts of renewable electricity and green hydrogen. It is still unclear whether and how sufficient demand for green steel will develop, which will also make it possible to refinance the additional costs of green steel compared to conventionally produced steel. In their contribution, the scientists explain how a steel climate club could make concrete contributions to overcoming this challenge.

This research is part of the "NDC ASPECTS" project, which is funded under the Horizon 2020 research and innovation programme of the European Union under grant agreement no. 101003866. As part of the project, the researchers are developing global and national pathways for decarbonising four sectors that are central to climate protection and are investigating international policy frameworks that can enable and promote this transformation.