The company, which supplies sheet metal to the auto industry, says the move will cut carbon emissions from production by approximately 70%, a reduction equivalent to removing more than 900,000 cars from the road each year. This is good news for the climate and for the auto sector. As the second-largest consumer of steel after buildings and infrastructure, the auto industry needs low-carbon steel products if it’s going to meet its own emissions targets.

Virtually every vehicle on wheels is made primarily of steel. That’s a problem since the steel industry is one of the highest emitting sectors of the economy, responsible for 7% of global greenhouse gas emissions, mostly due to its reliance on coal. Currently, tailpipe emissions are responsible for the bulk of the pollutants from road transportation. But that’s changing as uptake of electric vehicles continues apace. EVs don’t produce exhaust and, in many places, the grid is increasingly generating power from renewable or other green power sources.

Increasingly, attention is turning to the carbon footprint of an automaker’s supply chain and all the materials that go into building a vehicle. Of those materials, steel makes up the largest proportion at 60%. Indeed, the embedded, or production, emissions of an electric car will likely account for around 60% of total life-cycle emissions by 2030, with steel making up anywhere from 16% to 27% of that, according to the EU-based advocacy group Transport and Energy.

Auto sector takes small steps toward green steel

To date, only a handful of automakers have pledged to increase their use of either fossil-free steel or steel with reduced carbon intensity by 2030. BMW announced its procurement of “carbon-reduced” steel supplied by H2 Green Steel, based in Sweden, and has partnered with Salzgitter AG to receive “low-carbon steel” in 2026.

Volkswagen has signed a memorandum of understanding with Salzgitter AG to procure carbon-reduced steel starting at the end of 2025; Volvo has pledged that 50% of its steel purchases in 2030 will be lower in emissions intensity compared to current levels. And General Motors announced a supply agreement with U.S. Steel and ArcelorMittal for reduced carbon steel. (Algoma will in all likelihood also supply the automotive industry with green steel given that approximately 30% of its products go to the auto sector.)

The climate impact of shifting to low-carbon steel is profound. If, as recommended by groups such as Transport and Energy, European automakers replace 40% of the steel used in their manufacturing process by 2030, carbon dioxide emissions from the production of cars plummets by 6.9 megatonnes, equivalent to the annual GHGs emitted from 3.5 million fossil fuel cars. Switching to 100% green steel in new cars by 2040 will reduce emissions equivalent to taking 8.1 million gas-powered cars off the road.

In a recent report, the International Council on Clean Transportation (ICCT) acknowledges the importance of the public announcements made by some of the biggest players in the auto industry while also pointing out that “among major automakers selling vehicles in Europe and North America, only four have pledged to procure any fossil-free steel by 2030.” The report authors note that those commitments apply to a mere 2% of the global steel used by all these major automakers. Adding in “commitments to procure steel with reduced GHG emissions,” they write, “increases the share of cleaner steel to 4% of all automotive steel.”

The authors further argue that the auto sector is in a unique position to push the steel industry to decarbonize. “Automakers have significant purchasing power,” says Marta Negri, an associate researcher at ICCT and lead author of Which Automakers Are Shifting to Green Steel? “They can influence demand for green steel.”

Steel’s great big carbon footprint

Around 75% of steel worldwide is manufactured using coal-fired blast furnaces. According to the International Energy Agency’s Net Zero Emissions scenario, the steel industry must reduce its carbon output by 25% by 2030 to achieve climate neutrality by 2050 – and the sector is nowhere close to being on track.

On the bright side, the carbon intensity of steel production can drop considerably through deployment of low-carbon technologies and resource efficiency. For starters, the coal-blast furnaces can be replaced with electric ones, like Algoma’s, reducing emissions by as much as 95%. Scrap steel can be incorporated at much higher volumes than is done currently, and green hydrogen power is being actively explored for its potential as a cost-effective energy source.

Transportation, in turn, leaves a massive carbon footprint. Road transport in Canada is the second-largest source of carbon pollution after oil and gas, responsible for 22% of the country’s overall emissions. Electrifying road mobility is essential to meeting Canada’s international obligation under the Paris Agreement to limit global warming to below 1.5°C. Steel’s importance in the auto sector is becoming increasingly visible in part because more of it is needed in electric vehicles – due to their large battery units – than in combustion vehicles.

To see a significant dent in steel-related emissions, carmakers will need to employ a combination of strategies. “Green steel can be a competitive advantage for an automaker,” Negri notes. “Some companies are exploring this and being very vocal about their green steel use.”

Still, the road to industrial decarbonization is long. “We’d like to see more ambition,” Negri adds. “Two-thirds of the automakers we analyzed haven’t made any commitments to purchase low-carbon or fossil-free steel. And we need to see that the commitments made are carried through.”

Victoria Foote is a writer and editor who specializes in clean energy and climate.

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In an online roundtable Wednesday, policy experts said that even “smokestack industries” in Canada can become low-carbon sectors using existing technology. To make the transition, however, they’ll require government subsidies.

Manufacturers generate more than 10% of the country’s gross domestic product, export more than $354 billion in goods annually, and employ 1.7 million Canadians. Energy-intensive heavy industry – including steel, cement, pulp and paper, and chemicals – accounts for 85% of the sector’s emissions.

Many manufacturers have responded to the COVID-19 crisis by retooling their operations to produce much-needed personal protective equipment – an indication of their ability to adapt to national imperatives, said Ralph Torrie, who co-authored an analysis on the manufacturing sector’s climate change challenges.

“We see the extent to which industry in general can quickly pivot when there is an urgent need or high motivation,” Torrie said at a session hosted by Corporate Knights as part of its seven-part Building Back Better event series.

“We tend to forget about that in the business-as-usual environment – how capable we are of change when we need to.”

In the analysis, the authors propose $5 billion in federal spending over the next decade to purchase emission reductions from the steel and cement industries. Such a program would unlock $37 billion in private-sector spending, generate the equivalent of 24,000 full-time jobs annually and reduce emissions by eight million tonnes per year by 2030, according to analysis by Torrie and Chris Bataille, a researcher at the Paris-based Institute for Sustainable Development and International Relations (IDDRI).

It would also put the steel and cement sectors on track to achieve net-zero emissions in their operations by 2050 if they employ carbon capture technology. The Canadian Steel Producers Association recently committed to a “net-zero by 2050” target.

Bataille said cement and steel are among the most commonly used commodities in the global economy. They’re also among the most greenhouse-gas (GHG) intensive, since both rely heavily on fossil fuels such as coking coal in their manufacture.

To achieve deep decarbonization, government will have to subsidize the cement sector’s emission reductions since current carbon prices are not high enough to encourage the required investment, said Kent Stuehmer, vice president for cement operations at Lehigh Hanson Canada. He said governments at all levels should incorporate climate strategies into their procurement policies to provide a market for low-carbon cement and other industrial commodities.

Lehigh Hanson is currently in the planning stages to build the world’s first carbon-neutral cement plant in Canada but will need government support to do so, Stuehmer said.

Canada’s steelmakers already have among the world’s lowest emissions per tonne of steel produced and are aiming to do more, said Mark Rowlinson, of the United Steelworkers union and president of Blue Green Canada. But the market currently provides no reward to low-emission producers, he said. At the same time, there is a global glut of steelmaking capacity, driven in part by Chinese plants that have high emissions per tonne.

It’s a similar story for aluminum; Canada has the lowest-GHG aluminum in the world but gains no market advantage as a result of those green credentials. Rowlinson said governments should ensure that low-carbon steel and aluminum are used for public projects like bridges, buildings and public transit vehicles.

Nick Xenos, who leads the Greening Government program at the federal Treasury Board, said Ottawa is working on its procurement policies and has targets for green buildings, zero- or low-emission vehicles and the use of renewable electricity in its operations. However, he said there is a “big data gap” when it comes to assessing the carbon footprint of various construction materials, and the government has asked the National Research Council to create a database through which the performance of prospective suppliers can be accurately assessed.

Smaller manufacturers, meanwhile, are facing increasing efforts to improve material recycling, a move that would reduce waste and lower the GHG intensity of their supply chains. The effort is hampered by the fact that waste disposal remains inexpensive in Canada, especially when compared to enhanced recycling systems, said Jo-Anne St. Godard, executive director of the Recycling Council of Ontario.

She argued that governments – and municipalities in particular – need to set clear and ambitious requirements for recycled content in their procurement policies. That includes proper scoring and verification.

The roundtable’s moderator, Diana Fox Carney, noted that there are important gender aspects to the call for government support in the male-dominated manufacturing sector. To date, women have been hit hardest by pandemic-related job losses due to the closure of restaurants, retail outlets and education and daycare services.

Rowlinson suggested there might be a second round of employment cuts that would hit manufacturers if the economic shutdown continues and noted that his sector is seeing more and more women enter its workforce.

Shawn McCarthy writes on sustainable finance and climate for Corporate Knights. He is also senior counsel for Sussex Strategy Group.

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When it comes to tackling Canada’s carbon emissions, the fuels that power our cars and heat our homes garner the most attention, but the steel and concrete that go into those vehicles and buildings are also highly carbon intensive. Concrete and steel together account for 14.7% of global carbon dioxide emissions, which cause most global warming. Most of the technologies we need to drastically reduce these emissions already exist: in patents, in some engineer’s lab or in commercial use where conventional technology doesn’t work as well.

Another way to cut emissions is by encouraging design that uses less steel and cement altogether – and uses them more strategically combined with other materials, like wood and sustainable plastics. Updated building and infrastructure codes or regulations that put a price on carbon would encourage builders to try out alternatives.

Other game-changing technologies are within reach, but they need developmental support or guaranteed early markets to build economies of scale: primary steel made with hydrogen and electricity instead of coal, and new cement chemistries and processes that are virtually carbon-free, in line with the 2050 goal for net-zero CO2 emissions the Canadian Steel Producers Association has set for itself.

Here’s a breakdown of how a $1 billion federal investment a year through 2025 could begin to bring these climate game-changers to scale:

• $100 million per year to develop measurement and verification systems to allow carbon pricing and regulations to operate more effectively, and allow already lower emissions producers to capture market share;
• $200 million per year for research and development; and
• $700 million per year in smart, dynamic subsidies to help emerging technologies and approaches prove their effectiveness for broader use (the less GHG-intensive the technology, the greater the subsidies).

These would apply to ultra-low-emissions steel, cement and chemical products and their substitutes for public infrastructure, buildings and vehicles. The subsidies could go towards making all new and retrofit government buildings and infrastructure low emissions in both materials and energy use.

With this $1 billion green jolt to the steel, cement and other materials sectors, the government could stimulate the economy in the short run, reduce Canada’s emissions and improve our long-run competitiveness in a low-carbon world.

Chris Bataille is an energy economist who serves as a lead author for the Intergovernmental Panel on Climate Change.

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