The Environmental Appeal of Green Steel, with Chris Bataille

Notable Quotes

• Nearly a tenth of global greenhouse gas emissions come from steel: “Those emissions estimates [from steel production] vary somewhere between 7 and 9 percent of all the emissions that come out of the energy supply and demand system globally.” (8:43)
• Good recycling practices will improve the steel industry’s environmental impact: “The first and foremost thing is to do more, better recycling. With the recycling that we do, make sure copper doesn't get mixed into the crushed vehicles and the material coming out of buildings. The more you [improve recycling protocols], the more that iron becomes endlessly recyclable within our economy, and it means less iron ore has to be processed with greenhouse gas–intensive processes.” (9:26)
• Without incentives, green steel is prohibitively expensive for producers: "Decarbonization of heavy industry is called hard to abate for a reason ... It's about risk and innovation for companies. It can take 10 years for them to experiment with a couple of different technologies that can cost them billions. This process, unless there is an external force feeding into driving it forward, providing funding ... it's just really too expensive for a single firm to take on if there's no big profit in it." (21:47)

Top of the Stack

• The Entrepreneurial State by Mariana Mazzucato
• Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist by Kate Raworth
• "US renewable energy consumption surpasses coal for the first time in over 130 years" from the US Energy Information Administration

The Full Transcript

Daniel Raimi: Hello, and welcome to Resources Radio, a weekly podcast from Resources for the Future. I'm your host, Daniel Raimi. This week, we talked with Dr. Chris Bataille, associate researcher at the Institute for Sustainable Development and International Relations in Paris. Chris has a wide range of expertise, and today, we'll talk with him about the potential for reducing and perhaps eliminating carbon dioxide emissions from steelmaking. Steel accounts for almost 10 percent of the world's greenhouse gas emissions, and Chris will help us understand how the industry currently works, which approaches and technologies can reduce emissions, and how policies can help drive innovation. Stay with us.

Okay, Chris Bataille from the Institute for Sustainable Development and International Relations—with the French acronym IDDRI—thank you so much for joining us today on Resources Radio.

Chris Bataille: Well, thank you very much for having me today.

Daniel Raimi: Thanks, Chris. So, today, as you know, we are going to be talking about steelmaking and, in particular, options for reducing and potentially eliminating carbon dioxide and greenhouse gas emissions from the steelmaking process. But before we do that, we always like to ask our guests: How did you get interested in working on environmental issues?

Chris Bataille: Well, that's a good question. I sometimes wonder myself how that happened. I'm from the Canadian Pacific Northwest, and I've lived in British Columbia in the mountains of Alberta my entire life. My family has been from British Columbia for well over a hundred years, and I spent much of my 20s traveling around, climbing mountains throughout the world, doing a lot of snorkeling and diving and swimming in various places.

One of the things that really struck me was I was seeing dramatic changes in the landscapes I was seeing. So, routes that were possible in the 1980s, I was having a hard time doing, and routes that I did in the 1990s are simply not possible today. I did a lot of snorkeling up and down both coasts of Mexico, and in the shallow Caribbean, I was seeing bleaching of coral in the warm, shallow waters that I was not seeing in the western half. I was still seeing the brilliant colors in the deeper waters. As I went on to my graduate studies and what have you, it occurred to me that a lot of what they've been telling about climate change, this is direct physical evidence, and it probably piled up and propelled me forward.

Daniel Raimi: Yeah, that's so interesting. We actually have had a number of guests who talk about rock climbing in particular and other kinds of mountain sports that really brought them into the “environmental scene” (for lack of a better word), so that's really interesting. So, let's move into our sort of substantive conversation now and talk about, just for a few minutes, the basics of steelmaking. We're not going to spend a ton of time on this, but to understand how to reduce emissions from steelmaking, you have to understand how it basically works. I am far from an expert on this topic, but my basic understanding is that there are two main processes for making steel today. One of them is called the blast furnace-basic oxygen furnace method, and the other one uses an electric arc furnace. So, first, please tell me if that's the right way of thinking about it. Then, second, can you give us a basic overview for how these processes work?

Chris Bataille: That's very close, actually. Well done. So, the blast furnace-basic oxygen furnace is the primary way that we make steel today. When we dig iron ore out of the ground, it comes with a lot of oxygen attached. That has to be removed before the iron will melt properly, and we can mix carbon with it and chromium and zinc and other thing.s so that it behaves like steel— the thing that we actually need. Just as a sideline, the two materials that we use most in human life and civilization are: concrete is number one and steel is the second. It's all around you. It's holding everything up, and you've probably encountered it several times today.

With the blast furnace-basic oxygen furnace route, the way they get the oxygen off the iron ore is with coal. They preprocess very, very high-carbon coal, so you get what's called coke. It's very, very dark. Then, they sort of almost gasify it and mix it with the iron in a blast furnace. What effectively happens is that carbon preferentially attaches the oxygen, removes it, and comes off as carbon dioxide and generates heat in the process, helping everything melt. That leaves you with that liquid elemental iron that you need to mix with other things to make steel.

The next phase: there's various processes where you've got to get the carbon levels just right. You mix in zinc, chromium, molybdenum, other things to get just the kind of steel that you want, but that's how most of the steel is made today. It's ubiquitous throughout our civilization. Countries that industrialized early have the sort of most steel already processed, built into buildings, vehicles, what have you. What that means is that they—at the end of the life of those vehicles and those buildings—they can then go and recycle that steel. They can melt it down and reuse it for the next pass. Now, that melting is mostly done in those electric arc furnaces that you described. So, they'll gather up scrap. They'll clean it off to the highest extent possible and then it passes into the electric arc furnace where it's melted down and then reprocessed into steel.

Now, there's a big challenge here in that the way we tend to do scrap sorting today: we don't clean it. We're not careful enough with removing paint or other minerals, what have you, and very specifically, copper. In a car, there's several miles of electric wiring, as you can imagine, running from various components of the car. If that copper stays in the car when it's scrapped, it can prevent that steel from being reused for thin-sheet steel for making cars, so it becomes a lower-quality steel that's only used for lower-end uses, so if we want to endlessly recycle the iron in that steel, we've got to be careful at the end of life of things to separate out the various components such that they can be recycled separately. About 70 percent of our steel today comes from blast furnace-basic oxygen furnaces, roughly 30 percent from electric arc furnaces.

Daniel Raimi: Fantastic. That's really helpful. So, now that we have a very basic understanding of how steel is made and at least one of the major techniques for recycling it, can you give us a sense of how the carbon dioxide story comes into the equation? So, you mentioned already in the context of describing how blast furnace-basic oxygen furnace steelmaking works, but can you sort of describe what the main sources of CO2 emissions are from each of these processes? Then, maybe give us like a global 50,000-foot view and help us understand how much CO2 the steel production industry actually creates globally.

Chris Bataille: Fair enough. So, the vast majority of greenhouse gases from making steel is making primary steel with blast furnace-basic oxygen furnaces, and it's because of the coal. It's in the first phase when you use the coal to strip oxygen off the iron ore and in the second phase when you're doing what's called the smelting, where you're melting it and mixing it with other elements. Now, and with electric arc furnaces, the greenhouse gas emissions depend on how you make the electricity. So, if you're in a region where all the electricity is made with coal, that could be a really intense—GHG-intense—way to make steel. If you're in a region that is mainly running off hydropower or nuclear or even natural gas—natural gas is half the GHG emissions intensity of coal—you get a much lower intensity steel out of that. Yeah, so the estimates vary somewhere between 7 and 9 percent of all the emissions that come out of the energy supply and demand system globally.

Daniel Raimi: Okay, so right. Obviously, a really big sector if I imagine we can compare that to any number of nations around the world.

Chris Bataille: Yeah, exactly.

Daniel Raimi: So, let's talk now about opportunities for actually reducing emissions from the sector. What are, you know—there are probably lots and lots of answers to this question, so I hope you can sort of steer us to the highlights—but what are some of the major options that are available for reducing and then potentially eliminating emissions from, again, either of these two processes?

Chris Bataille: Sure. The first and foremost thing is to do more, better recycling. So, with the recycling that we do, make sure copper doesn't get mixed in into the crushed vehicles and the material coming out of buildings. The more you do that, the more that iron becomes endlessly recyclable within our economy. It means that less iron ore has to be processed with those GHG-intense processes I mentioned before. So, better recycling. We don't need to use as much steel as we do in vehicles and buildings. You can design vehicles and buildings and infrastructure such that you minimize the steel. You only use as much as you need to, and that applies to concrete. That applies to other things that are GHG-intense. So, design matters.

In the past, we just didn't care about greenhouse gases, and frankly, concrete and steel were cheap, so we used a lot of concrete and steel to make things very strong, very fire-safe, very flood-proof, what have you, but we don't necessarily need to use as much steel and cement as we do. Yeah, so those two things. Now, then the question becomes, can we actually reduce the GHG intensity in making primary steel? Starting with the electric arc furnaces, you've got to clean up the electricity, but that applies to all sectors of the economy. We need to completely decarbonize the electricity production system, such that buildings and homes and factories and everything that runs on electricity can basically run GHG-free. That equally applies to the electric arc furnaces.

Making primary steel, though—and we're still going to need to make a lot of primary steel—there's about five or six different ways you can do that. There's a very controversial way where you actually take, you burn wood or wood from biomass from forests and what have you, and you create what's called biocoal or biochar, and you use that as a substitute for the coal. It works. It's been used in various places in the world, and it's how the iron and steel industry got going way back in the 1600s and 1700s, but we want our forests to remain standing. We want our forests to expand, to absorb carbon out of the atmosphere and what have you, and there's just not enough biomass out there to run our entire steel system off biochar.

There's what's called carbon capture and storage where we capture the emissions off the back end of a steel plant. We separate out the CO2, and then we push it underground. That's got a lot of potential, but it's actually quite energy intensive and technically difficult to separate small volumes of CO2 from the nitrogen in the air that surrounds us. There are technologies coming along that change the blast furnace-basic oxygen furnace and the coking process at the beginning and make them all one process. Then, if you use just pure oxygen with that combined process, you get a pure CO2 stream that comes out of the back end that is actually quite feasible to capture, compress, and push underground. It's an existing oil and gas technology today, but the trick is you have to master that new smelting technology. Also, it's not going to work in places where you don't have the proper geology for pushing that CO2 a long way underground.

Probably, a more promising route is what's called direct reduced iron followed by an electric arc furnace. Roughly 68 percent of steel comes from blast furnaces, and then 28 percent from electric arc furnaces. There's a small portion that comes from a technology called natural gas direct reduced iron furnaces. What happens with these is that either natural gas or coal is combined with water. It's used to create what's called a synthetic gas, where there's a small amount of carbon monoxide in there but also a very large amount of hydrogen. What the hydrogen does is it strips the oxygen off the iron ore, and then the pelletized iron ore goes into an electric arc furnace. Then, it gets processed like any other steel. There are direct reduced iron plants operating globally. They are less than a third of the average emissions intensity of a basic oxygen furnace. One of them is in Quebec in Canada, and it runs off hydroelectricity. It's literally generating about a quarter of your average blast furnace-basic oxygen furnace.

Now, a team of Swedish companies are working on taking that direct reduced iron technology and making it fully hydrogen, so you don't start with natural gas or coal, but you actually, you make hydrogen on purpose up front. Use that as what's called “the reductant,” which removes the oxygen from the iron ore, and then it goes into an electric arc furnace. They actually, last year, started work on a full sized plant in Sweden. Now, they were able to do this because they're very industrially organized. They're used to kind of working with one another, and they actually managed to link the iron ore mines in the north of Sweden with the steel company with the community where the steel company is and the producers that use the steel. Their whole idea was that they want to be in the steel business forever, and this is one way they could do this.

So, this is a technology that's been kind of on the shelf, talked about in academic journals for about 20 years, but they decided that they want to go ahead with this. So, that technology has a lot of potential going forward into the future because there are electric arc furnaces all over the place that are doing recycling. Now, if you can set up a hydrogen-driven reduction plant at the front end—and this could be done in Ohio, this could be done in California, this could be done in China, this could be done in India—you could transform the steel industry gradually off that coal-based blast furnace-basic oxygen furnace route onto a hydrogen direct reduced iron route. It can do almost everything that the blast furnace-basic oxygen furnace can do.

Moving a little further into the future, there are a few companies working on a direct electrification route that doesn't need the hydrogen. One of them is based in Boston. It's called Boston Metals, and they want to directly use electrolysis to directly remove the oxygen and smelt the iron at the same time. You can imagine this as being the iron making method of 2075 or 2100 onward. It's more efficient. It's more direct, but it uses a lot of electricity.

So, one of the nice things about the hydrogen DRI route is that if we have cheap electricity at night when windmills are spinning or you've got nuclear plants or even coal plants that are producing too much electricity for us to use, they can make a lot of hydrogen. Then, that hydrogen could be used to process the steel. Yeah. Those are the big ways that we're sort of looking at going forward for eliminating greenhouse gas emissions from steel.

Daniel Raimi: That's so interesting. Both of those technologies are super interesting, and I'm sure we could spend an entire episode just talking about either one of them, but one question that comes to mind and understanding that they are, at these very early stages, may be just at the pilot stage or at the lab stage, do we know anything about sort of current costs and potential future costs for these technologies compared to the blast furnace-basic oxygen furnace method?

Chris Bataille: Oh, that's an excellent question. Those cost estimates vary a lot, and they vary a lot mainly because of the cost of electricity. If you're doing hydrogen direct reduced iron, you've got to make the hydrogen somehow. Say, if your electricity is costing three to four cents, five cents per kilowatt hour, you're probably looking at steel that costs 40 to 50 percent more than blast furnace steel. If it's practically free electricity, it's probably down around 20 percent more.

Now, where things both get complicated and get interesting is that there are a huge fleet of basic blast furnace-basic oxygen furnace steel plants out there around the world and especially a really large efficient fleet in China where most of the world's steel is made today. Now, what are you going to do with those? It's difficult to ask people to prematurely shut things down. But are there ways to retrofit that plant in a reasonably economic fashion? One of the things you can do is pre-charge the blast furnace with a large amount of scrap. If you haven't got scrap, you feed it with green pig iron. So, you take one of those hydrogen reduction units that I was talking about. You use it to remove the oxygen from iron ore, and then you take what's called “pig iron” or “briquetted iron,” and you feed that into the blast furnace. So, then it only needs to run on a minimum of coal for heating uses.

You can also pre-inject the blast furnace with a certain amount of hydrogen. There's a German company working on ways to mix coal and hydrogen together, and they think they can get up to 20, 30, maybe 40 percent hydrogen. Now, the thing is none of this is going to be cheap, and you get wildly different cost estimates. You're probably looking at between 40 and 100 percent more for the cost of steel coming out of one of these things. It would then be using an existing plant. You're not disturbing an existing supply chain, what have you.

Now, what's interesting about that is that that 20, 40, up to 100 percent more for the steel producer is enough to put them out of business if they're competing with another steel producer, just running on a coal-based blast furnace-basic oxygen furnace plant. However, if they can channel that green steel through to a consumer that's willing to pay for it, it would only add about half a percent to 2 percent to the cost of a car and basically almost a negligible amount of the cost of a building.

So, the cost of green steel would be almost nothing to a consumer or a construction firm, but it's everything to the primary steel firm. So, one of the things that myself and many other groups are working on, is if there is a way to directly link the suppliers and the consumers such that that green steel doesn't get lost in the general pool of steel and therefore, get priced out of business. It goes straight through to somebody that it's worth it to pay the extra money for.

Daniel Raimi: Yeah, that's so interesting. It reminds me of efforts that I think we see in a lot of different areas of energy and environment where there's an interest in trying to see if there is sort of a private market that can be created for some of these environmental benefits that aren't being fully priced in the market.

Chris Bataille: Exactly.

Daniel Raimi: Yeah. My colleague, Alan Krupnick, recently released a paper on what's called green natural gas, right? So, low-methane natural gas, and trying to explore options for creating a market around that energy source. I can't help but ask one very brief question. Maybe it's a long answer, I don't know, but you mentioned the term “pig iron,” which I've come across a little bit in reading about this topic. Do you know where that term comes from? Why is it called pig iron?

Chris Bataille: Back about, going back to Roman times, there'd be a blacksmith shop where the blacksmith would gather up used and worn out things made out of iron, so broken swords, plowshares, pots, what have you. When they had enough of that stuff, they put it in a big pot, and they get some charcoal and they'd heat it up really, really high to the melting point of iron. Then, that iron would be poured out into basically like a sand pit. Effectively, the pour would go in, and there'd be almost like these legs and premade shapes around the center. In effect, they called it a pig effectively because it looked like a mother pig suckling her babies.

Daniel Raimi: That's fantastic. I'm imagining Game of Thrones, right and then and stuff like that.

Chris Bataille: Very much so.

Daniel Raimi: So, one more kind of substantive question before we go into our final Top of the Stack question, which is again, a very broad question that I encourage you to answer however you think appropriate, which is: how do you think about the role of policy and businesses in trying to reduce emissions from the sector? You've mentioned a variety of technologies as well as maybe non-technological approaches being more efficient, more of a cycling so on and so forth, but can you tell us a little bit about some of the policies that you think would be useful or that may already be underway in the world to help encourage the deployment of these technologies as well as increase recycling and so forth?

Chris Bataille: No, absolutely. Decarbonization of heavy industry is called hard to abate for a reason, and it's not really the technological solutions. It's about risk, and it's about risk and innovation for companies. It can take 10 years for them to experiment with a couple of different technologies that can cost them billions. This process, unless there is an external force feeding into driving it forward, providing funding, and what I'm thinking of here is national security, it's just really too expensive for a single firm to take on if there's no big profit in it.

So, currently today, there is no market for green steel. There's no one willing to pay 20, 40, 100 percent more for green steel. So, why would our ArcelorMittal Steel, why would Tata, why would Kobe get it? Why would they spend billions of their own money and their effort creating it when they're basically kind of mostly hanging on by their fingernails most of the time with profit margins of 2, 3, 5 percent? It keeps them in business, but it's not enough to really splash out on the R&D. On the other hand, we have a big social incentive to decarbonize steelmaking and decarbonizing heavy industry in general.

So, one of the things we have to do is connect that social externality of needing to eliminate emissions through to the iron steel producers. How do we incentivize them to do this and in a way that's not wasteful? So, right up front, R&D has always been sort of targeted as the place where we put social money to kind of bring the innovation frontier to the point where it's worth it for firms to start experimenting with it and rest risking their private capital, but it goes beyond that. The most expensive phase of taking a heavy industry technology from R&D through to full commercialization is not the R&D. It's the part that comes after R&D. It's the early pilot plants. There's nowhere you can sell into. All it does is cost you money. It's a money pit.

Then, the true money pit shows up. It's when you have built your first full scale plant, and it takes you 5 to 10 years, and then you don't know if there's a market for the steel it. Often, they call that the “Valley of Death.” It just very often kills off technology. So, one of the things we have to do is to provide lead markets. We need green procurement by governments. We need to incentivize car makers like Tesla, Volvo, what have you. For their premium brand electric vehicles, say they'll—whatever clean green steel they can buy that's usable for vehicle sheet scale—they'll pay that premium for it because they know they can charge it through their customers without affecting your market share or your profits.

So, if you build up enough of that demand, you hit the economies of scale to bring the cost down, to start making green steel competitive with that coal-based steel that I was talking about before. One of the magic things that starts to happen, then, if you have a good measurement system for tagging tons of steel as it moves around the world, then carbon pricing and border carbon adjustments and standards can start to do their work of winnowing out markets for green steel products and starting to push out the coal-based steel, the coal-based parts of the market.

Daniel Raimi: That's so interesting. There are, right, all those different policy mechanisms. I'm sure, again, we could do multiple podcast episodes, and we probably will over the years on those different policy mechanisms to actually deploy or help incentivize the deployment of some of these technologies. So, Chris, this has been so interesting. I've learned so much just over the last 25 minutes or so. Let's move on now to our last question that we ask all of our guests, which is asking you to recommend something that you've read or watched or heard that's either directly or maybe just loosely related to the environment or energy that you think is really interesting. I'll just start by pointing out a data point that I think is very interesting and timely. It comes from the US Energy Information Administration's “Today in Energy” series. If you're an energy nerd, you probably already follow this, but if you're not, I encourage you to check it out.

It's an article that was published on May 28th that basically showed that US renewable energy surpassed total energy consumption from coal in the United States in 2019. So, that's a pretty historic landmark. It hasn't happened for over 130 years. Part of that is due to the rapid rise of wind and solar in the electricity sector, but there's also lots of renewable energy that's consumed in other parts of the energy sector. We use biofuels, as you've mentioned, wood and other waste products in our industrial processes. We, of course, use biofuels and transportation as most of our listeners will know, and then residential and commercial heating. We use a lot of wood in those sectors, and we use a lot of solar as well.

So, coal still outpaces renewables in the electricity sector, but across the entire energy system, we now get more energy from renewables than we do for coal. So, pretty interesting data point and one that I think is worth noting, but now, let me turn it over to you, Chris, and ask you to recommend something and tell us what's at the top of your literal or metaphorical reading stack.

Chris Bataille: Speaking directly to the point you just brought up there, I would say if you haven't read Mariana Mazzucato's The Entrepreneurial State, you probably should because there's sort of a persistent myth that the state is inefficient. It spends money badly. It doesn't do innovation, all sorts of things like that. But she very carefully goes through and smashes up all those myths. Specifically, both wind and solar are technologies literally created by co-investment from private industry and the state. So, PV [photovoltaics] comes from satellites. It was initially all military applications. Back in the beginning, they couldn't take up enough fuel with the satellite to keep it running, and it was either send up a small nuclear reactor or put the very first solar panels onto a satellite. That was PV's first killer application.

Then, it gradually built its market share from there. Wind is very much, it's a created technology, a lot of state intervention, pushing innovation frontier, working with firms. The British today are getting bids for basically five euro cents per kilowatt hour for floating offshore wind, which is cheaper than natural gas. It's cheaper than coal effectively, and it's because they had this applied program of working with their offshore wind turbine for firms, looking at the parts of the supply chain that they couldn't do themselves were too risky, and providing cash, working together with them that was built out as co-IP, and then once those things were built and mastered, then the companies went back into a competitive mode. So Mariana’s The Entrepreneurial State.

If you want to go more futuristic, I highly recommend Doughnut Economics by Kate Raworth. She's another British researcher, and she's talking about where we want to go with the economy in the long run, and she has a reconception of what is the purpose of economics. She has this doughnut diagram where in the inside of the donut is minimal sustainable water, clean air, electricity, and everything for everybody on earth and pushing out the diagram that way, and then there's like a thin area, an area of what we call sustainability on all those items, but then there's a point there where we start pushing beyond. We're starting to break the planetary boundaries for those things. We're emitting too much CO2 and the eutrophication and too many fertilizers injecting in waterways, toxins, what have you. What she's articulating is we can feed everybody, we can give good lives to everybody on this planet within the capacities of our economic role, but we have to stay within those planetary boundaries. It's a very fun, very provocative read that might change how you think about economics.

Daniel Raimi: That's fascinating. It sounds like a nice compliment to a book that a couple of people have recommended previously on the podcast, which is The Wizard and the Prophet, which gets at that same potential tension and identifying some potential solutions as well. So, Chris, thank you again so much for joining us today on Resources Radio, talking about steel and reducing emissions from steelmaking. It's been so interesting. I've learned a ton, and we really appreciate you joining us.

Chris Bataille: Thank you for the time. I greatly enjoyed this.

Daniel Raimi: You've been listening to Resources Radio. If you have a minute, we'd really appreciate you leaving us a rating or a comment on your podcast platform of choice. Also, feel free to send us your suggestions for future episodes. Resources Radio is a podcast from Resources for the Future. RFF is an independent nonprofit research institution in Washington, D.C. Our mission is to improve environmental, energy and natural resource decisions through impartial economic research and policy engagement. Learn more about us at rff.org. The views expressed on this podcast are solely those of the participants. They do not necessarily represent the views of Resources for the Future, which does not take institutional positions on public policies. Resources Radio is produced by Elizabeth Wason with music by me, Daniel Raimi. Join us next week for another episode.