How tailoring steel standards to policy goals can accelerate the transition
Strict emission thresholds unlock investment in low-carbon steel, while thresholds that reflect scrap content determine how much recycling or clean primary steel production are rewarded. A new Agora analysis shows how governments can set the core criteria of steel standards to match what individual policies aim to achieve.
Steel standards work best when tailored to the objectives of different policy measures supporting the steel transition, according to a new study by Agora Industry and S-Curve Economics. Standards define what counts as low-carbon steel and are fast becoming a key tool for governments to drive this transition. Three design choices matter in particular: how strict the emission thresholds are, how much of the value chain it covers and whether the thresholds are based on the share of scrap in the steel product. These main design decisions shape which technologies get built, how much producing clean steel costs and where investment flows.
Thresholds and value chain coverage work hand in hand
Setting very low emission thresholds from the outset unlocks investment in low-carbon steel, the analysis finds. This determines which technologies qualify and therefore drive the shift to new production routes. Broader value chain coverage helps reduce emission beyond the steel plant itself, for example in raw materials and energy supply.
Broadening coverage adds comparatively little to production costs; the emission threshold is the main cost driver. In Germany, for example, tightening the emission threshold raises production costs three times as much as broadening the scope, mainly due to upfront investment in new plants. The upside: plants powered largely by renewables benefit from low running costs and greater resilience to fossil fuel price shocks which is a growing advantage in volatile energy markets.
As supplier data and low-carbon inputs are often still lacking, the authors recommend starting with low thresholds and broadening value chain over time to balance near-term feasibility with full coverage in the long term.
Scrap: balancing recycling and clean primary steel
Recycled scrap lowers both emissions and costs. Raising the share of scrap used in hydrogen-based steel production from 20 to 70 percent more than halves the cost gap with conventional steel in all countries considered in this analysis. In South Korea, for example, this would cut the cost of avoiding one tonne of carbon dioxide from around 300 to 110 euros per tonne carbon dioxide. In Brazil, this would reduce the cost from around 110 to 40 euros per tonne carbon dioxide. But scrap is finite, so the extent to which it can be used is limited and clean steel made from low-carbon iron ore must be scaled up too. Emission thresholds should therefore depend on the available scrap share: a higher threshold for low-carbon ore-based steel, and a lower threshold for steel with a higher scrap shared steel. This rewards recycling, encourages investments in clean electricity from steelmakers, whilst also keeping investment in clean ore-based steelmaking attractive.
What this means in practice
By tailoring standards to the specific goal of specific measures, governments can improve the effectiveness of policies that support the shift to near-zero-emission steel. For clean steel subsidies, for example, very low emission thresholds can ensure that only near-zero emission technologies qualify. Through green public procurement, governments can create a lead market for low-carbon steel; however, ambition must be matched to available supply: a more moderate emission threshold to begin can be tightened over time, or a strict threshold can be applied to a small but growing share of purchases.
The analysis Made to measure: tailoring steel standards to policy goals was carried out by Agora Industry and S-Curve Economics. Presented as a dynamic scrolly, it examines how emission thresholds, value chain coverage and scrap content affect the bankability and emission savings of different steelmaking routes. It uses the sliding scale approach that rates clean steel by both greenhouse gas intensity and scrap share. The analysis covers 11 countries: Australia, Brazil, Canada, China, Germany, India, Indonesia, South Africa, South Korea, Sweden and the United Kingdom. Rather than proposing changes to existing standards, it aims to advance the conversation about how governments can tailor choices around standards to different policy goals.
The scrolly is linked down below. An in-depth policy brief and country factsheets will follow in the coming weeks.
