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Ali Hasanbeigi 1, Hongyou Lu 2, Nan Zhou 2

1 Global Eciency Intelligence

2 Lawrence Berkeley National Laboratory

Net-Zero Roadmap for China’s

Steel Industry

March 2023

Net-Zero Roadmap for China’s Steel Industry

The author would like to thank Dr. Yang Fuqiang, Dr. Chen Jiong, and Zhu Hong of Peking

University, Dr. Chen Yu of the China Steel Development Research Institute, Dr. Zhang Chunxia

of the Chinese Society of Metals, Dr. Li Bing of the Metallurgical Planning Institute, Dr. Zhang

Qi of the Northeastern University, and Dr. Li Xiuping of the China Iron and Steel Research

Institute, Chan Yang of European Climate Foundation, Lynn Price of Lawrence Berkeley

National Laboratory, Chris Bataille of Columbia University, and Navdeep Bhadbhade of Global

Eciency Intelligence for their valuable input on this study and/or their insightful comments on

the earlier version of this document.

Acknowledgements

Lawrence Berkeley National Laboratory (LBNL) and Global Eciency Intelligence, LLC (GEI) have

provided the information in this publication for informational purposes only. Although great care has

been taken to maintain the accuracy of the information collected and presented, GEI and LBNL do

not make any express or implied warranty concerning such information and does not assume any

responsibility for consequences that may arise from the use of the material. Any estimates contained

in the publication reﬂect our current analyses and expectations based on available data and

information. Any reference to a speciﬁc commercial product, process, or service by trade name,

trademark, manufacturer, or otherwise does not constitute or imply an endorsement,

recommendation, or favoring by GEI or LBNL.

This manuscript has been co-authored by Lawrence Berkeley National Laboratory under Contract

No. DE-AC02-05CH11231 with the U.S. Department of Energy. The U.S. Government retains, and the

publisher, by accepting the article for publication, acknowledges that the U.S. Government retains a

non-exclusive, paid-up, irrevocable, worldwide license to publish or reproduce the published form of

this manuscript or allow others to do so for U.S. Government purposes.

Recommended citation: Hasanbeigi, A., Lu, H., Zhou, N. 2023. Net-Zero Roadmap for Chinese Steel

Industry. Lawrence Berkeley National Laboratory, and Global Eciency Intelligence. LBNL-2001506

https://eta.lbl.gov

https://www.globaleciencyintel.com

Disclaimer

Net-Zero Roadmap for China’s Steel Industry

Iron and steel manufacturing is one of the most energy-intensive industries worldwide,

accounting for around 7% of global greenhouse gas (GHG) emissions and 11% of global carbon

dioxide (CO2) emissions. In 2021, China accounted for 53% of global steel production. The

Chinese steel industry produced 1,033 million tonnes (Mt) of crude steel in 2021, of which

89.4% was produced by primary steelmaking plants using blast furnace-basic oxygen furnace

(BF-BOF) and 10.6% was produced by the electric arc furnace (EAF) production route.

China has pledged to peak its CO2 emissions before 2030 and achieve carbon neutrality

before 2060. China’s steel industry is expected to peak its CO2 emissions before 2030. This

peak in steel industry CO2 emissions is mainly driven by the peaking of domestic steel

demand. Steel production in China has one of the highest carbon intensities in the world

because the majority of steel is produced by the energy-and carbon-intensive BF-BOF

steelmaking process.

The goal of this study is to develop a roadmap for deep decarbonization of the Chinese steel

industry. We analyzed the current status of the Chinese steel industry and developed

scenarios for 2050 to assess dierent decarbonization pathways that can substantially reduce

the CO2 emissions of the steel industry in China.

We included ﬁve major decarbonization pillars in our analysis: 1) demand reduction, 2) energy

eciency, 3) fuel switching, electriﬁcation, and grid decarbonization, 4) technology shift to

low-carbon steelmaking, 5) carbon capture, utilization, and storage (CCUS).

Our analysis to 2050 shows that under a business-as-usual (BAU) scenario, due to steel

demand reduction, moderate energy eciency improvement, technology shift (primarily to the

EAF production route), and decarbonization of the grid, annual CO2 emissions will decrease by

54% between 2020 and 2050. Chinese steel production drops 23% in the same period under

the BAU scenario (Figure ES1).

The Net-Zero scenario has the largest reduction in annual CO2 emissions in the steel industry,

as it includes a more ambitious contribution of demand reduction, energy eciency measures,

fuel switching, technology shift to low-carbon steel production, and CCUS. Under the Net-Zero

scenario, total CO2 emissions from the Chinese steel industry will decrease to about 78 MtCO2

per year in 2050, a 96% reduction compared to the 2020 level.

Figure ES1. Total annual CO2 emission in the steel industry in China under various decarbonization

scenarios, 2020-2050 (Source: this study)

Executive Summary

500

1,000

1,500

2,000

2,500

2020 2030 2040 2050

CO2Emissions (MtCO2/yr)

BAU Scenario Moderate Scenario Advanced Scenario Net-Zero scenario

/61

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AliHasanbeigi1,HongyouLu2,NanZhou21GlobalEfficiencyIntelligence2LawrenceBerkeleyNationalLaboratoryNet-ZeroRoadmapforChina’sSteelIndustryMarch20231Net-ZeroRoadmapforChina’sSteelIndustryTheauthorwouldliketothankDr.YangFuqiang,Dr.ChenJiong,andZhuHongofPekingUniversity,Dr.ChenYuoftheChinaSteelDevelopmentResearchInstitute,Dr.ZhangChunxiaoftheChineseSocietyofMetals,Dr.LiBingoftheMetallurgicalPlanningInstitute,Dr.ZhangQioftheNortheasternUniversity,andDr.LiXiupingoftheChinaIronandSteelResearchInstitute,ChanYangofEuropeanClimateFoundation,LynnPriceofLawrenceBerkeleyNationalLaboratory,ChrisBatailleofColumbiaUniversity,andNavdeepBhadbhadeofGlobalEfficiencyIntelligencefortheirvaluableinputonthisstudyand/ortheirinsightfulcommentsontheearlierversionofthisdocument.AcknowledgementsLawrenceBerkeleyNationalLaboratory(LBNL)andGlobalEfficiencyIntelligence,LLC(GEI)haveprovidedtheinformationinthispublicationforinformationalpurposesonly.Althoughgreatcarehasbeentakentomaintaintheaccuracyoftheinformationcollectedandpresented,GEIandLBNLdonotmakeanyexpressorimpliedwarrantyconcerningsuchinformationanddoesnotassumeanyresponsibilityforconsequencesthatmayarisefromtheuseofthematerial.Anyestimatescontainedinthepublicationreflectourcurrentanalysesandexpectationsbasedonavailabledataandinformation.Anyreferencetoaspecificcommercialproduct,process,orservicebytradename,trademark,manufacturer,orotherwisedoesnotconstituteorimplyanendorsement,recommendation,orfavoringbyGEIorLBNL.Thismanuscripthasbeenco-authoredbyLawrenceBerkeleyNationalLaboratoryunderContractNo.DE-AC02-05CH11231withtheU.S.DepartmentofEnergy.TheU.S.Governmentretains,andthepublisher,byacceptingthearticleforpublication,acknowledgesthattheU.S.Governmentretainsanon-exclusive,paid-up,irrevocable,worldwidelicensetopublishorreproducethepublishedformofthismanuscriptorallowotherstodosoforU.S.Governmentpurposes.Recommendedcitation:Hasanbeigi,A.,Lu,H.,Zhou,N.2023.Net-ZeroRoadmapforChineseSteelIndustry.LawrenceBerkeleyNationalLaboratory,andGlobalEfficiencyIntelligence.LBNL-2001506https://eta.lbl.govhttps://www.globalefficiencyintel.comDisclaimer2Net-ZeroRoadmapforChina’sSteelIndustryIronandsteelmanufacturingisoneofthemostenergy-intensiveindustriesworldwide,accountingforaround7%ofglobalgreenhousegas(GHG)emissionsand11%ofglobalcarbondioxide(CO2)emissions.In2021,Chinaaccountedfor53%ofglobalsteelproduction.TheChinesesteelindustryproduced1,033milliontonnes(Mt)ofcrudesteelin2021,ofwhich89.4%wasproducedbyprimarysteelmakingplantsusingblastfurnace-basicoxygenfurnace(BF-BOF)and10.6%wasproducedbytheelectricarcfurnace(EAF)productionroute.ChinahaspledgedtopeakitsCO2emissionsbefore2030andachievecarbonneutralitybefore2060.China’ssteelindustryisexpectedtopeakitsCO2emissionsbefore2030.ThispeakinsteelindustryCO2emissionsismainlydrivenbythepeakingofdomesticsteeldemand.SteelproductioninChinahasoneofthehighestcarbonintensitiesintheworldbecausethemajorityofsteelisproducedbytheenergy-andcarbon-intensiveBF-BOFsteelmakingprocess.ThegoalofthisstudyistodeveloparoadmapfordeepdecarbonizationoftheChinesesteelindustry.WeanalyzedthecurrentstatusoftheChinesesteelindustryanddevelopedscenariosfor2050toassessdifferentdecarbonizationpathwaysthatcansubstantiallyreducetheCO2emissionsofthesteelindustryinChina.Weincludedfivemajordecarbonizationpillarsinouranalysis:1)demandreduction,2)energyefficiency,3)fuelswitching,electrification,andgriddecarbonization,4)technologyshifttolow-carbonsteelmaking,5)carboncapture,utilization,andstorage(CCUS).Ouranalysisto2050showsthatunderabusiness-as-usual(BAU)scenario,duetosteeldemandreduction,moderateenergyefficiencyimprovement,technologyshift(primarilytotheEAFproductionroute),anddecarbonizationofthegrid,annualCO2emissionswilldecreaseby54%between2020and2050.Chinesesteelproductiondrops23%inthesameperiodundertheBAUscenario(FigureES1).TheNet-ZeroscenariohasthelargestreductioninannualCO2emissionsinthesteelindustry,asitincludesamoreambitiouscontributionofdemandreduction,energyefficiencymeasures,fuelswitching,technologyshifttolow-carbonsteelproduction,andCCUS.UndertheNet-Zeroscenario,totalCO2emissionsfromtheChinesesteelindustrywilldecreasetoabout78MtCO2peryearin2050,a96%reductioncomparedtothe2020level.FigureES1.TotalannualCO2emissioninthesteelindustryinChinaundervariousdecarbonizationscenarios,2020-2050(Source:thisstudy)ExecutiveSummary-5001,0001,5002,0002,5002020203020402050CO2Emissions(MtCO2/yr)BAUScenarioModerateScenarioAdvancedScenarioNet-Zeroscenario3Net-ZeroRoadmapforChina’sSteelIndustryThecontributionofeachdecarbonizationpillartotheCO2emissionsreductionsintheNet-Ze-roscenarioforthesteelindustryinChinain2050isshowninFigureES2.Inthisscenario,thetechnologyshift(primarilytoscrap-basedEAFsteelproduction)makesthelargestcontributiontoCO2emissionsreduction,followedbydemandreductionandfuelswitching,electrificationofheating,andelectricitygriddecarbonization.FigureES2.ImpactofCO2emissionsreductionoptionsintheNet-ZeroEmissionsscenariofortheChinesesteelindustry(Source:thisstudy)TheNearZeroEmissionsscenarioistechnologicallyachievablewiththemostcommerciallyavailabletechnologies,suchasscrap-EAFanddirectreducediron(DRI)-EAF,andnearcommercialtechnologies,suchashydrogen-DRIsteelmaking.AchievingtheresultsshownintheNet-ZeroEmissionsscenariorequiresunprecedenteduptakeoflow-carbontechnologies,rangingfromaggressiveenergyefficiencyimprovementstolarge-scaleadoptionofcommercializeddecarbonizationandlow-carbonironmakingtechnologies,switchingtosecondarysteelmanufacturing,andsignificantlyincreasingtheuseoflower-carbonfuelinChina’sironandsteelindustry.Theprimarygoal,however,shouldbephasingoutofcarbon-intensiveBF-BOFsteelmaking.Inthenearterm,werecommendtheChinesegovernmenttodiscouragetheinstallationofanynewblastfurnaces(BFs)inChina.TherewillbeasubstantialincreaseindomesticsteelscrapavailabilityinChina,eveninthenearterm(by2030),thatcouldreplacetheneedfortheconstructionofnewBFs.Instead,therewillbeaneedtobuildnewEAFsteelmakingplants.TheChinesegovernmentcanalsodiscouragethereliningofBFsasmuchaspossibleandencouragetheinstallationofH2-DRIorH2-readyDRIplantstoproduceironfromironore.ReliningBFsisasubstantiallycapital-intensiveinvestmentthatwillextendBFs’lifetimeforanother15-plusyearswhilekeepingtheircarbonemissionsalmostatthesamelevel.ReliningBFswillresultinstrandedassetsthatarenotinlinewithChina’scarbonpeak-ingandcarbonneutralitygoals.ThecapitalcosttorelineaBFcouldbeevenhigherthanthecapitalcostofbuildinganewDRIplant.Inaddition,asChinaandtherestoftheworldbuildafewH2-DRIplantsinthenextfewyearsandgainexperienceandconfidenceinthislow-carbonironmakingtechnologyandasthepriceofgreenH2dropsinthecomingyearswiththelargeprogramsandincentivesinplaceinChina,theshifttoH2-DRIcouldbecomeevenmoreattractiveinthecomingyearsthanreliningBFs,anditwillcertainlybeamoreclimate-friendlyinvestment.2,103(450)(319)(398)(736)(110)(12)782020DemandReductionEnergyEfficiencyFuelSwitching&Electrification&GriddecarbonizationTechnologyShifttolow-carboniron&steelmakingCCUSCarbonSink(BiomasswithCCS)2050-Net-ZeroScenarioAnnualCO2Emissions(MtCO2/yr)-5001,0001,5002,0002,5004Net-ZeroRoadmapforChina’sSteelIndustryThegovernmentshouldcontinuetopushforenergyefficiencythroughbenchmarking,retrofits,andincentives;whileimprovingsteelproducts’recyclingsystemtoincreasescrapqualityandavailability.TheChinesegovernmentshouldbeaheadofthecompaniesbyprovidingstandardsandpolicyguidanceintermsofcarbonemissionstandardsforsteelproductsandhydrogenapplicationsinmetallurgy.Steelcompanies,whilecontinuepursuingdecarbonization,needtoconsiderimplementinglife-cycleemissionstandardsaswellasemissionlabelsfortheirsteelproducts.Inthemid-term,thegovernmentshouldplanandguidetheindustryadjustments,especiallyintermsofphasingoutblastfurnacesandpotentiallyrelocatingsteelmillstomatchlocalrenewableresources.TheChinesegovernmentcanalsoleveragemarketforcesandsetupgreenpublicprocurement(GPP)programsforsteeltoincentivizelow-carbonsteelproduction.Steelcompanies,inthemid-term,willfaceevenhigherpressureandcompetitiontoadoptlow-carbontechnologies.Werecommendsteelcompaniesjoinanindustrygrouporapublic-privatepartnershiptohaveaccesstothelatestdevelopmentintechnologies(H2DRI,CCUS,smartmanufacturing,etc.)andpolicies.Werecommendsteelcompaniesdeveloppilotsanddemonstrationprogramstouse,test,andfurtherimprovelow-carbonironandsteelmak-ingtechnologies.WesuggestthattheChinesegovernmentprovidefinancial,regulatory,andpolicysupportontechnologyinnovationintheareasofinvestinginhigh-riskandhigh-returnbreakthroughtechnologies,developingtech-to-marketprogramsandencouragingtechnologypilots,tests,andvalidation.5Net-ZeroRoadmapforChina’sSteelIndustryExecutiveSummary21.Introduction62.China’ssteelindustryproductionandtrade83.Globalsteelindustry’sCO2emissions104.TheprofileofenergyuseandemissionsinChina’ssteelindustry114.1.EnergyuseinChina’ssteelindustry114.2.BenchmarkingenergyandCO2emissionsintensitiesoftheChinesesteelindustry115.Net-zeroroadmapforthesteelindustryinChina165.1.Decarbonizationscenarios165.2.DecarbonizationpathwaysfortheChinesesteelindustry166.ImpactofdecarbonizationpillarsonChina’ssteelindustry196.1.Demandreduction196.2.Energyefficiency226.3.Fuelswitching,electrification,andgriddecarbonization246.4.Technologyshifttolow-carbonsteelproductiontechnologies266.5.Carboncapture,utilization,andstorage407.Actionplanandrecommendations47References53Appendices60TableofContents6Net-ZeroRoadmapforChina’sSteelIndustryIronandsteelmanufacturingisoneofthemostenergy-intensiveindustriesworldwide.Theuseofcoalastheprimaryfuelforironandsteelproductiongloballymeansthatironandsteelproductionhasamongthehighestcarbondioxide(CO2)emissionsofanyindustry.Theironandsteelindustryaccountsforaroundaquarterofgreenhousegas(GHG)emissionsfromtheglobalmanufacturingsector(IEA2019).Theworld’ssteeldemandisprojectedtoincreasefrom1,951milliontonnes(Mt)in2021toupto2,500Mtin2050(IEA2020a).Whilein2021,Chinaaccountedfor53%ofglobalsteelproduction,Indiawillleadintermsofproductiongrowthinthefuture.AfricaandtheMiddleEastaretheothertworegionswiththehighestprojectedgrowthrateinsteelproductionby2050(IEA2019).Thisprojectedincreaseinsteelconsumptionandproductionwilldriveasignificantincreaseintheindustry’sabsoluteenergyuseandCO2emissionsintheabsenceofsubstantialeffortstodecarbonizetheironandsteelindustry.ChinahaspledgedtopeakitsCO2emissionsbefore2030andachievecarbonneutralitybefore2060.China’ssteelindustryisexpectedtopeakitsCO2emissionsbefore2030(MIIT2022).Thegovernmentaimstoimprovecomprehensiveenergyintensityby2%from2020to2025andimplementEnergyEfficiency“TopRunners”programsinthesteelindustry(ChinaGovernmentWebsite2022).Theindustryisalsoexpectedtoincreasetheshareofelectricarcfurnaces(EAFs)fromthecurrent10.6%to15%by2025and20%by2030.Inaddition,theproductionofanynewironandsteelmakingcapacityisstrictlylimited.“Or-derly”developmentofsecondarysteelmakingisencouragedthroughapreferentialcapacityswappolicytoreplaceoldprimarysteelmakingwithscrap-basedEAFsteelmaking.Thegovernmentalsosupportsthedevelopmentofhydrogen-basedsteelmaking(MIIT2022).ChinalauncheditsnationalEmissionsTradingSysteminJuly2021.Currently,itonlycoversthepowersector(Tan,2022),butthesteelindustryisexpectedtojoinsoon,withgovernmentsupportforthedevelopmentofalife-cyclecarbonemissionsdatamanagementsystem(ChinaGovernmentWebsite2022).Figure1showsasimplifiedflowdiagramofsteelproductionusingblastfurnace-basicoxygenfurnace(BF-BOF),directreducediron-electricarcfurnace(DRI-EAF),andscrap-EAFproductionroutes.Ironoreischemicallyreducedtoproducesteelbyoneofthesethreeprocessroutes:BF-BOF,smeltingreduction,ordirectreduction.SteelisalsoproducedbythedirectmeltingofscrapinanEAF.BF-BOFandEAFproductionroutesarethemostcommontoday.In2021,theBF-BOFproductionrouteaccountedforapproximately71%ofthecrudesteelmanufacturedworldwide,andEAFproductionaccountedforapproximately29%(worldsteel2022).InChina,almost90%ofsteelisproducedbyBF-BOFprimarysteelmakingroute.Introduction1Thereareemergingtechnologiesthataimtoreduceenergyuseandemissionsfromthesteelindustry,suchastheonesdescribedinIEA(2020a)andHasanbeigietal.(2013).Forexample,hydrogenDRI-basedEAF(H2-DRIEAF)steelmaking,wherehydrogen(H2)isproducedbyelectrolysisusingrenewableelectricity,isoneofthekeydeepdecarbonizationtechnologiesthatisbeingpiloted(SAAB2021)andisbeingseriouslyconsideredbybothindustryandpolicymakers.Thisandotheremergingtechnologiesarediscussedinmoredetaillaterinthisreport.7Net-ZeroRoadmapforChina’sSteelIndustryFigure1.Steelmakingproductionroutes(worldsteel2020)Thisreportpresentsthecurrentstatusofproduction,energyuse,andemissionsofthesteelindustryinChina.Itdevelopsanet-zerodecarbonizationroadmapfortheChinesesteelindustrythatisdata-driventoachievemid-centurynet-zeroCO2emissions.Inaddition,itincludesthemilestonesofwhattheindustrycanaccomplishin2030,2040,and2050underseveralscenarios.Itconcludeswithbriefpolicyrecommendationsandactionplansforthegovernment,industry,andotherkeystakeholdersinChina.8Net-ZeroRoadmapforChina’sSteelIndustryWorldsteelproductionmorethandoubledbetween2000and2021(Figure2).In2021,Chinaaccountedfor53%ofglobalsteelproduction,asignificantincreasesince2000whenitssharewasonly15%(worldsteel2022).The2008dropinworldsteelproductionshowninthefigurewasduetotheglobaleconomicrecession.The2014globalproductiondropwasmainlycausedbyaslowdownintheChineseeconomyandchronicovercapacity,whichresultedinshuttingdownillegalinductionfurnacesandoldsteelplantsinChina.In2020,worldcrudesteelproductiondecreasedbyabout1%becauseoftheglobalCOVID-19pandemic.Figure2.CrudesteelproductioninChinaandtherestoftheworld,2000-2021(worldsteel2021,2022)Figure3showsthetop10steel-producingcountriesintheworld.In2021,thesetop10producingcountriesaccountedfor83%ofworldsteelproduction,andChinaisbyfarthelargeststeelproductioncountry(worldsteel2022).Thetop20steelexportingcountriesaccountforover90%oftotalworldsteelexports.Accordingtoworldsteel(2022),China,Japan,Russia,India,andUkrainewerethetopfivenetexporters(exportminusimport),andtheEU-27,U.S.,Thailand,Mexico,andPolandwerethetopfivenetimporters(importminusexport)ofsteelin2021.Figure3.Top10steel-producingcountriesin2021(worldsteel2022)2China’sSteelIndustryProductionandTrade05001,0001,5002,0002,50020002005201020152020Crudesteelproduction(Mt)China-BF/BOFChina-EAFRestoftheWorld020040060080010001200ChinaIndiaJapanU.S.RussiaS.KoreaTurkeyGermanyBrazilIranRestoftheWorldCrudeSteelProduction(Mt)9Net-ZeroRoadmapforChina’sSteelIndustryTheChinesesteelindustryproduced1,033Mtofcrudesteelin2021,ofwhich89.4%wasproducedbyprimarysteelmakingplantsusingblastfurnace-basicoxygenfurnace(BF-BOF)and10.6%wasproducedbytheelectricarcfurnace(EAF)productionroute.Chinaalsoimported27.8Mtandexported66.2Mtofsteelmillproductsin2021.Therefore,only6%ofthetotalsteelproducedinChinaisexported,andtheremaining94%ofsteelproductioninChinaistosatisfytheChinesedomesticdemand.Thetop5largeststeelcompaniesinChinaareChinaBaowuGroup,AnsteelGroup,ShagangGroup,HBISGroup,andJianlongGroup(worldsteel2022).HebeiProvinceaccountedfor23%oftotalcrudesteelproduction,followedbyJiangsu(11%);Shandong(8%);Liaoning(7%),andShanxi(6%)(Figure4)(EditorialBoardofChinaIronandSteelIndustryYearbook,2021).ThebuildingsandinfrastructureconstructionsectoristhelargestconsumerofsteelinChina(59%),followedbymachinery(16%),theautomobileindustry(6%),theenergysector(4%),andothersteelproducts(QianzhanResearchInstitute2020;L.GuoandHe2021).Figure4.CrudesteelproductionbyprovinceinChinain2020(NBS2021)-50100150200250300HebeiJiangsuShandongLiaoningShanxiAnhuiHubeiHenanGuangdongInnerMongoliaSichuanJiangxiHunanFujianGuangxiYunnanTianjinShanghaiJilinShaanxiZhejiangXinjiangGansuHeilongjiangChongqingNingxiaGuizhouQinghaiCrudesteelproduction(Mt)10Net-ZeroRoadmapforChina’sSteelIndustryTheglobalsteelindustryemittedaround3.6gigatonsofCO2(GtCO2)in2019(Figure5).GlobalBF-BOFsteelproductionemittedaround3.1GtCO2,andglobalEAFsteelproductionemittedaround0.5GtCO2in2019.EAFsinChinaandIndiahavehigherCO2intensitiesbecauseoftheiruseofalargeshareofpigironorcoal-baseddirectreducediron(DRI)asfeedstockinsteadofsteelscrap.Asaresult,theproductionofsteelinEAFsinthesetwocountriescausesanincreaseinglobalEAF’sCO2emissions(Hasanbeigi2022).Figure5.GlobalsteelindustryCO2emissionsin2019byprocesstype(Hasanbeigi2022)Inourpreviousstudy(Hasanbeigi2022),weestimatedthetotalCO2emissionsfromthesteelindustryineachofthecountriesstudiedbasedonourestimatedCO2intensitiesforBF-BOFandEAFbycountryandtheamountofproductionineachcountry.Figure6showstheresultsofthisanalysis,withChinastandingoutasresponsiblefor54%oftheglobalsteelindustry’sCO2emissionsin2019.Figure6.TotalCO2emissions(MtCO2)fromsteelproductioninmajorproducingcountries2019(inMtCO2)(Hasanbeigi2022)BasedonthetotalsteelindustryemissionspresentedaboveandtheglobalGHGemissionsof52GtCO2-ein2019(includingnon-CO2GHGemissionsaswell)reportedinUNEP(2020),theglobalsteelindustryaccountsforaround7%oftotalglobalGHGemissions.BasedonthetotalsteelindustryemissionspresentedaboveandglobalCO2emissionsof33GtCO2in2019reportedinIEA(2020b),theglobalsteelindustryaccountsforaround11%oftotalglobalCO2emissions.3GlobalSteelIndustry’sCO2Emissions-5001,0001,5002,0002,5003,0003,5004,000BF-BOFEAFTotalCO2emissions(MtCO2)-5001,0001,5002,0002,5003,0003,5004,000ChinaRestofWorldIndiaJapanSouthKoreaRussiaU.S.GermanyBrazilUkraine11Net-ZeroRoadmapforChina’sSteelIndustry4.1.EnergyuseinChina’ssteelindustryInChina,thesteelindustryaccountedforaround34%ofthetotalfuelusedintheChinesemanufacturingsectorin2020(NBS2022).Figure7showsthesharesofdifferentenergyinputs(ontheleft)andthesharesofdifferentenergytypesconsumed(ontheright)inthesteelindustryinChina.Theleftcharthighlightstheenergyinputs,whiletherightchartprovidesamoredetailedbreakdownintermsofend-useenergyconsumption,takingintoconsiderationofwasteheatrecovery.Cokehadthelargestshareandaccountedfor67%oftheChinesesteelindustry’sfinalenergyuse.Inasteelplant,energyisusedindifferentend-usesfordifferentpurposes.Processheating,especiallyinBFs,toconvertironoreintopigiron/hotmeta,lhasthehighestshareoftheend-useenergyuseinthesteelindustryinChina.Figure7.Shareofdifferentenergyinputstotheindustry(left)andenergytypesconsumed(right)inthesteelindustryinChinain2020(NBS2022)Note:electricityconsumptionisshowninthefinalenergyandisnotconvertedtoprimaryenergy.4.2.BenchmarkingenergyandCO2emissionsintensitiesoftheChinesesteelindustryInternationalbenchmarkingofenergyintensityandCO2emissionsintensitycanprovideapointagainstwhichacompanyorindustry’sperformancecanbecomparedtothatofthesametypeofcompanyorindustryinothercountries.BenchmarkingcanalsobeusedforassessingtheenergyandemissionsimprovementpotentialthatcouldbeachievedbytheimplementationofenergyefficiencyorCO2reductionmeasures.Also,onanationallevel,policymakerscanusebenchmarkingtoprioritizeenergysavinganddecarbonizationoptionsandtodesignpoliciestoreduceenergyandGHGemissions.Inourpreviousstudy,weconductedbenchmarkingoftheenergyintensityandCO2emissionsintensityoftheironandsteelindustryin15majorsteel-producingcountriesplustheEU-27region(Hasanbeigi2022).BelowweshowsomekeyresultsfromthatstudytohighlightthepositionoftheChinesesteelindustry’senergyintensityandCO2emissionsintensityinaninternationalcontext.4TheProfileofEnergyUseandEmissionsinChina’sSteelIndustryCoal11%Coke53%CokeOvenGas3%BlastFurnaceGas15%ConverterGas2%OtherCokingProducts1%NaturalGas1%LNG2%Heat1%Electricity11%Total:734MtceCoal14%Coke67%OtherCokingProducts1%NaturalGas1%LNG2%Heat1%Electricity14%Total:589Mtce12Net-ZeroRoadmapforChina’sSteelIndustry4.2.1.BenchmarkingtotalsteelindustryenergyandCO2emissionsintensitiesWhenconsideringthetotalfinalenergyintensityoftheentiresteelindustryin15majorsteel-producingcountriesplustheEU-27regionin2019,Italy,Turkey,Mexico,andtheU.S.havethelowestenergyintensityamongthecountriesstudiedbyHasanbeigi(2022)(Figure8).ThisisprimarilybecauseofasignificantlyhighershareofEAFsteelproductionintotalsteelproductioninthesecountries.EAFisasecondarysteelproductionprocessthatprimarilyusessteelscrapandthereforeuseslessenergytoproduceatonofsteelcomparedtoBF-BOF.Inotherwords,ahighershareofscrap-basedEAFproductionhelpsreducetheoverallenergyintensityofthesteelindustryinacountry.ItshouldbenotedthatEAFscanalsouseDRIorevenpigironwhichareenergy-intensivefeedstocksforEAFs.InsomecountrieslikeIndia,ahighamountofcoal-basedDRIisusedinEAFs,andinChina,alargeamountofpigironthatisproducedbyenergy-intensiveblastfurnacesisusedinEAFs,bothresultinginsignificantlyhigherenergyandemissionsintensityforthesteelproducedbyEAFsinthosecountries.However,otherfactorsalsoimpacttheenergyandCO2emissionsintensityofthesteelindustry,asdiscussedlaterinthischapter.Incontrast,Ukraine,China,India,andBrazilhavethehighestenergyintensitiesamongthecountriesstudied(Figure8).Ukraine,China,andBrazilalsohavethelowestshareofEAFsteelproduction.WhileIndia’ssteelindustryhasahighshareofEAFsteelproduction(56%),theenergyintensityofthisproductionisrelativelyhighmainlybecause,unlikemanyothercountries,asubstantialamountofDRIisusedasthefeedstocktoEAFsinIndia(around50%oftotalEAFfeedstock).Unlikerecycledsteelscrap,DRIisproducedfromironoreusingthedirectreductionprocess,whichisanenergy-andcarbon-intensiveprocess.Inaddition,Indiaisoneofthefewcountriesintheworldthatusescoal-basedDRItechnologyinsteadofnaturalgas-basedDRI.ThiscontributestohigherenergyintensityandemissionsforDRI-EAFsteelproducedinIndia.Figure8.Totalfinalenergyintensityofthesteelindustryinthestudiedcountries/regionin2019(Hasanbeigi2022)TherankingoftheCO2emissionsintensityofthesteelindustryamongthecountriesstudied(Figure9)isslightlydifferentfromtheenergyintensityranking.Italy,theU.S.,andTurkeyhavethelowest,andUkraine,India,andChinahavethehighestCO2emissionsintensity.TheU.S.CO2emissionsintensityislowmainlybecauseofthehighershareof13Net-ZeroRoadmapforChina’sSteelIndustryscrap-basedEAFsteelmakingandpartlybecauseofthehighshareofnaturalgasusedintheU.S.steelindustry(54%oftotalfuelused).Naturalgashasasignificantlyloweremissionsfactorperunitofenergycomparedtocoalandcoke,whicharetheprimarytypesofenergyusedinthesteelindustryinChinaandmanyothercountries.TheU.S.alsohasalowerCO2gridemissionsfactorthanTurkeyandMexico.OtherfactorsaffectingtheCO2emissionsintensityofthesteelindustryarediscussedattheendofthischapter.Figure9.TotalCO2emissionsintensityofthesteelindustryinthestudiedcountries/regionin2019(Hasanbeigi2022)Note:Brazil-CharcoalCNreferstowhencharcoalisconsideredcarbonneutral.Brazil-CharcoalC+referstowhencharcoalisnotconsideredcarbonneutralbecauseofquestionsandconcernsregardingthesustainabilityofbiomassusedinthesteelindustryinBrazil.4.2.2.BenchmarkingBF-BOFprimarysteelproduction’sCO2emissionsintensitiesBecauseBF-BOFandEAFsteelproductionroutesarequitedifferentandthustheirCO2emissionsintensityarealsosignificantlydifferentfromeachother,itiscrucialtodivedeeperandbenchmarkthesteelproductionineachcountryforeachproductionrouteinordertogiveamorefairandaccurateviewoftheenergyandcarbon-intensityofsteelproductionineachcountry.Figure10showstheCO2intensityofBF-BOFprimarysteelproductioninthestudiedcountriesin2019(Hasanbeigi,2022).ItisworthhighlightingthateventhoughChinahasthe3rdhighestCO2intensityforitsentiresteelindustry(Figure9),itsrankingimprovedimproveswhenonlytheCO2intensityfortheBF-BOFsteelproductionrouteisbenchmarked.AlthoughtheverylowshareofEAFsteelproductioninChinaresultsinahightotalCO2intensityforitsentiresteelindustry,morethan80%oftheBF-BOFsteelproductioncapacityinChinawasbuiltaftertheyear2000,withanaverageageofplantsaround15years(IEA2020c).Manyofthesenewplantsareusingmoreefficientproductiontechnology.Inaddition,inthepasttenyears,Chinahasbeenaggressivelyshuttingdownoldandinefficientsteelplants.IndiahasthehighestCO2intensityofBF-BOFsteelproductionmainlybecauseofmanyoldandinefficientBF-BOFplantsstilloperatinginIndia.Itshouldbenoted,however,thatsomeofthenewlybuiltsteelplantsinIndiaareamongtheworld’smostefficient.14Net-ZeroRoadmapforChina’sSteelIndustryFigure10.TheCO2intensityofBF-BOFsteelproductioninthestudiedcountries/regionin2019Note:Brazil-CharcoalCNreferstowhencharcoalisconsideredcarbonneutral.Brazil-CharcoalC+referstowhencharcoalisnotconsideredcarbonneutralbecauseofquestionsandconcernsregardingthesustainabilityofbiomassusedinthesteelindustryinBrazil.NosinglefactorcanbeusedtoexplainthevariationsinenergyandCO2intensityamongcountries.InadditiontotheenergyintensityofBF-BOFplants,anotherkeyfactoraffectingtheCO2intensityofBF-BOFsteelproductionisthemixoffuelusedinBF-BOFplantsineachcountry.TheU.S.,Mexico,andCanadahaveamongthelowest,andIndia,Vietnam,andChinahaveamongthehighestweightedaverageCO2emissionsfactorsoffuelsintheirsteelindustries.Ifcharcoalisconsideredcarbonneutral,Brazilhasthecleanestfuelmix,andifcharcoalisnotconsideredcarbonneutral,thenBrazilhasthehighestcarbon-intensivefuelmixforthesteelindustry.4.3.3.BenchmarkingEAFsteelproduction’sCO2emissionsintensitiesEAFsteelproductionislessenergy-andcarbon-intensivethanBF-BOFsteelproduction,especiallywhenmostorallofEAFfeedstockisrecycledsteelscrap1.Figure11showstheCO2intensityofEAFsteelproductioninthe15countriesplustheEU-27regionstudied(Hasanbeigi2022).BrazilandFrancehavethelowest,andIndiaandChinahavethehighestCO2intensityofEAFsteelproduction.AkeyreasonwhytheCO2intensityofEAFsteelproductioninIndia,China,andMexicoaresignificantlyhigherthanthatinoth-ercountriesisthetypeoffeedstockusedinEAFinthesecountries.Inmostcountries,steelscrapistheprimaryfeedstockforEAF.InIndiaandMexico,however,asubstantialamountofDRI(around50%inIndiaand40%inMexico)isusedasfeedstockinEAFs(worldsteel2021).InChina,insteadofDRI,asignificantamountofpigiron(around50%ofEAFfeedstock),whichisproducedviablastfurnaces,isusedasfeedstockinEAFs.BothDRIandpigironproductionishighlyenergy-intensiveprocesses,whichresultinhigherenergyandCO2intensityofEAFsteelproductionwhenusedasfeedstockinEAFs.Vietnam’shighCO2intensityofEAFsteelmakingcanbemainlyattributedtoitsveryhighelectricitygridCO2emissionsfactor.1Note:theembodiedenergyandcarboninrecycledsteelscrapareusuallynotincludedinEAFenergyandemissionsintensitiescalculations.15Net-ZeroRoadmapforChina’sSteelIndustryFigure11.TheCO2intensityofEAFsteelproductioninthestudiedcountries/regionin2019(Hasanbeigi2022)AnotherimportantfactorthatinfluencestheCO2intensityofEAFsteelproductionistheelectricitygridCO2emissionsfactor.OverhalfoftheenergyusedinEAFsteelmaking(includingrollingandfinishing)iselectricity.TheshareofelectricityintotalenergyusedecreasesastheshareofDRIusedinEAFsteelmakingincreases.Therefore,iftheemissionsfactoroftheelectricityusedinthesteelindustryislower,itwillsignificantlyhelptoreducetheCO2intensityofEAFsteelproduction.France,Brazil,andCanadahavethelowestelectricitygridCO2emissionsfactorsduetolargenuclear(inFrance)andhydro(inBrazilandCanada)powergeneration.India,Vietnam,andChinahavethehighestelectricitygridCO2emissionsfactorsamongstudiedcountriesduetothelargeshareofcoalusedintheirpowergeneration.SomeofthekeyfactorsthatcouldexplainwhytheChinesesteelindustry’senergyandCO2emissionsintensityvaluesdifferfromothercountriesare:1)ThelowshareofEAFsteelintotalsteelproduction2)Thecoalandcokeheavyfuelmixintheironandsteelindustry3)ThehigherelectricitygridCO2emissionsfactor4)ThetypeoffeedstocksinBF-BOFandEAF5)Thelevelofpenetrationofenergy-efficienttechnologies6)Thesteelproductmixineachcountry7)Theageofsteelmanufacturingfacilitiesineachcountry8)Capacityutilization9)Environmentalregulations10)Costofenergyandrawmaterials11)Boundarydefinitionforthesteelindustry16Net-ZeroRoadmapforChina’sSteelIndustry5.1.DecarbonizationscenariosAfteranalyzingthecurrentstatusoftheChinesesteelindustryanditsenergyandCO2intensity,wedevelopedadecarbonizationroadmapto2050fortheChineseindustryusingfourmainscenarios:1.BusinessasUsual(BAU)scenario:TheBAUscenarioassumesaslowimprovementinenergyefficiencyandfuelswitchingandslowadoptionofCCUStechnologies,whichislikelytohappenwithcurrentbusinesspracticesandcurrentpoliciesandregulations.2.ModerateTechnologyandPolicy(Moderate)scenario:Thisscenarioassumeshigherenergyefficiencyimprovement,morefuelswitchingtolowercarbonfuels,andaslightlyhigherrateoftheshifttoEAFsteelproduction.ItalsoassumeslowadoptionofCCUStechnologies.3.AdvancedTechnologyandPolicy(Advanced)scenario:Thisscenarioassumessignificantlyhigherenergyefficiencyimprovementusingcommerciallyavailabletechnologies,moreaggressivefuelswitchingtolowercarbonfuelsandswitchingtoscrap-basedEAFsteelmaking,andasmalladoptionoftransformativetechnologiessuchasH2DRI-EAF.4.Net-Zeroscenario:Thisscenarioassumesthemostaggressiveenergyefficiencyim-provementusingcommerciallyavailabletechnologies,moreaggressivefuelswitchingtolowercarbonfuels,andthehighestrateoftheshifttoscrap-basedEAFsteelmakingandamoderateadoptionofH2DRI-EAFsteelmaking.5.2.DecarbonizationpathwaysfortheChinesesteelindustryWeincludedfivemajordecarbonizationpillarsinouranalysis,whichare:1)demandreduction,2)energyefficiency,3)fuelswitching,electrification,andgriddecarbonization,4)technologyshifttolow-carbonsteelmaking(e.g.,scrap-basedEAF,H2-DRIEAF,etc.),5)carboncapture,utilization,andstorage(CCUS).EachofthesepillarsandtheirimpactonthedecarbonizationoftheChinesesteelindustryarediscussedinmoredetailinthefollowingsections.WeforecastedthetotalfinalenergyuseandCO2emissionsofthesteelindustryinChinaupto2050underdifferentscenariosbyapplyingvaryinglevelsofdifferentdecarbonizationpillars.TheresultsofouranalysisareshowninFigure12.IntheBAUscenario,duetosteeldemandreductionresultingina23%dropinsteelproduction,moderateenergyefficiencyimprovement,technologyshift(primarilytoEAF),anddecarbonizationofthegridupto2050,theannualCO2emissionswilldecreaseby54%from2020to2050.ThetotalannualCO2emissionsoftheChinesesteelindustrywilldropfrom2,103MtCO2/yearin2020to968MtCO2/yearin2050undertheBAUscenario.5Net-zeroRoadmapfortheSteelIndustryinChina17Net-ZeroRoadmapforChina’sSteelIndustryFigure12:TotalannualCO2emissioninthesteelindustryinChinaundervariousdecarbonizationscenarios,2020-2050(Source:thisstudy)TheNet-ZeroscenariohasthelargestreductioninannualCO2emissionsinthesteelindustry,asitincludesanaggressivecontributionofdemandreductionresultinginadecreaseof38%insteelproduction,energyefficiencymeasures,fuelswitching,technologyshifttolowcarbonsteelproduction,andCCUS.UnderourNet-Zeroscenario,thetotalCO2emissionsfromtheChinesesteelindustrywilldecreasetoabout78MtCO2peryearin2050,a96%reductioncomparedtothe2020level(Figure12).Figures13-14showthecontributionofeachdecarbonizationpillartotheCO2emissionsreductionsintheNet-ZeroscenarioforthesteelindustryinChinain2050.Inthisscenario,thetechnologyshiftpillar(primarilytoscrap-basedEAF)makesthelargestcontributiontoCO2emissionsreduction,followedbydemandreductionandfuelswitching,electrificationofheating,andelectricitygriddecarbonization.Resultsofouranalysisshowthatthecontribu-tionsofenergyefficiencyandCCUSwillbelowerthantheotherdecarbonizationoptions.Figure13.ImpactofthedecarbonizationpillarsonCO2emissionsoftheChinesesteelindustryunderNet-Zeroscenario(Source:thisstudy)-5001,0001,5002,0002,5002020203020402050CO2Emissions(MtCO2/yr)BAUScenarioModerateScenarioAdvancedScenarioNet-Zeroscenario2,103(450)(319)(398)(736)(110)(12)782020DemandReductionEnergyEfficiencyFuelSwitching&Electrification&GriddecarbonizationTechnologyShifttolow-carboniron&steelmakingCCUSCarbonSink(BiomasswithCCS)2050-Net-ZeroScenarioAnnualCO2Emissions(MtCO2/yr)-5001,0001,5002,0002,50018Net-ZeroRoadmapforChina’sSteelIndustryFigure14showstheimpactofthedecarbonizationpillarsonCO2emissionsoftheChinesesteelindustrytobringtheBAUscenario’sCO2emissionsdowntotheNet-Zeroscenario’slevel.Theareaofthegraphthatrepresentseachpillarindifferentcolorsshowsthecumula-tivecontributionofeachdecarbonizationpillartothetotaldecarbonizationofthesteelindus-tryinChinaduringtheperiod2020to2050.Figure14.ImpactofthedecarbonizationpillarsonCO2emissionsoftheChinesesteelindustrytobringtheBAUscenario’sCO2emissionsdowntotheNet-Zeroscenario’slevel(Source:thisstudy)-5001,0001,5002,0002,5002020203020402050CO2Emissions(MtCO2/yr)DemandReductionEnergyEfficiencyFuelSwitching,Electrification&GriddecarbTechnologyShifttolow-carboniron&steelmakingCCUSCarbonSink(BiomasswithCCS)BAUScenarioNet-ZeroScenario19Net-ZeroRoadmapforChina’sSteelIndustry6.1.DemandreductionThefirststepindevelopingtheChinesesteelindustrydecarbonizationpathwayswastodevelopprojectionsforsteelproductioninChinaduringtheperiod2020to2050.SteeldemandandproductioninChinaisakeydriversoftheindustry’sCO2emissions.SeveralsourcesreportthattheChinesesteeldemandhasalreadypeakedorisgoingtopeakinthenextfewyearsduetoacombinationofuncertaintiesinthereal-estatesectorandtheslowgrowthinmanufacturedexportproducts.China’s2021steelproductiondropped2.8%comparedto2020,andoutputfromJanuarytoNovemberof2022declined1.4%comparedtothesameperiodbefore.TheproductionofChina’ssteelindustryisexpectedtodeclinethereafter.TheprojectionsoffuturesteelproductionweremadeafterreviewingprojectionsprovidedinotherstudiessuchasIEA(2020),Zhouetal.(2020),CISA(2022),Chenetal.(2021),andMPP(2021).MostanalysesshowthatChina’ssteelproductionanddemandwilldeclineinthecomingyearsanddecades(Figure15)totherangeof600-750Mtofsteelby2050.Figure15.ProjectionsofChina’ssteelproductionanddemandindifferentstudies(MissionPossiblePartnership2021;J.Chen,Li,andLi2021;IEA2020;Bataille,Stiebert,andLi2021)Notes:STEPS=StatedPoliciesScenario;SDS=SustainableDevelopmentScenario;IDDRI=TheInstituteforSustainableDevelopmentandInternationalRelations;MPP=MissionPossiblePartnership;BAU=businessasusu-al;ChinaDREAM=ChinaDemandResourcesEnergyAnalysisModel.IEA(2020)citedthekeydrivingfactoroftheirassumptionistheongoinggovernment-ledstructuralchange,expectingChina’ssteelproductionwilldeclinetoabout740Mtby2050underIEA’sSustainableDevelopmentScenario(SDS).Batailleetal.(2021)usedtheapproachoflong-termdevelopmentconvergenceonper-capitasteelconsumptioninkeycountriesandregionstoestimateChina’ssteeldemand.TheauthorsexpectedChina’scurrentper-capitasteelconsumption(slightlybelow1200kgpercapita)willsignificantlydeclinetoabout250kgpercapitaby2050becauseasignificantportionoftheenergy,transport,water,andsanitaryinfrastructurehasbeendevelopedinthecountry(Bataille,Stiebert,andLi2021).RMIexpected6ImpactofDecarbonizationPillarsonChina’sSteelIndustry02004006008001,0001,200200020102020203020402050Annualsteelproduction/demand(Mt/year)IEASDS(Production)IDDRI(Demand)MPPBAU(Demand)RMI(Production)ChinaDREAM(Production)Historical20Net-ZeroRoadmapforChina’sSteelIndustryChina’surbanizationprocesswouldslowdowninthecomingdecades,thusresultinginadropinoverallsteeldemandinChina,especiallyinthebuildingsandmachinerysectors(J.Chen,Li,andLi2021).LawrenceBerkeleyNationalLaboratory’sChinaDREAMModel,whichisabottom-upend-useenergydemandmodel,alsoestimatedChina’ssteelproductionwilldeclinetoabout610Mtby2050basedonacombinationofphysicalsteeldemandmodelingbyenduses(e.g.,buildingstockturnover)andvalue-addedprojectionsforothersteelproducts(Zhouetal.2020).Fromavalue-chainperspective,themaindownstreamsteeldemandincludesbuildingsandconstruction,machinery,automobiles,energysystems,hardwareproducts,steelwoodfurniture,homeappliances,railway,shipping,containers,andotherindustries.In2020,about59%ofsteelwasusedinbuildingsandconstructionprojects,includingbuildingsfortherealestateindustryandinfrastructuresuchasroads,highways,bridges,airports,andindustrialconstructionprojects(Figure16).Thebuildingssectoraloneaccountedfor35%oftotalsteeldemand.Thedevelopmentofconstructionprojectsalsodrivesupindirectconsumptionofsteelinmachinerydemand,hardwareproducts,andhomeappliances,whichaccountedfor16%,3%,and1%ofChina’ssteelproductionin2020.Theautomobileindustry,energysector,andothersegmentsofsteeldemandaccountedforanother6%,4%,and7%ofsteelproduction,respectively(QianzhanResearchInstitute2020).Figure16.China’ssteeldemandbyend-usein2020(QianzhanResearchInstitute2020;L.GuoandHe2021)ItisexpectedthatsteeldemandfromChina’sbuildingssectorwilldeclineinthefuture,drivenbyashrinkingpopulationandsaturationofbuildingstocks.Giventhebuildingsectorhasbeenthelargestend-useofChina’ssteel,thiswillhaveasignificantimpactonChina’soverallsteeldemand.Thenewstimulusoninfrastructureprojectswouldincreasesteeldemand,butgivenaweakerglobaleconomyandCOVID-19restrictionsinChina,itwillnotbeabletooffsetthesteeldemanddeclinefromtherealestateindustry.Futuresteeldemandmayalsobedrivenupbynewgrowthareasinautomobiles(e.g.,electricvehicles)andenergysectors(e.g.,gridexpansion,renewableenergygeneration,CCSsystems).Studiesexpectthatthenewsteeldemandmaybeoffsetbyintelligentandsmartmanufacturing,materialsubstitution,recycling,andsharedmobility(Chen,Li,andLi2021).GivenallofthisinformationonthefuturedemandforsteelinChina,Figure17showstheprojectionsofChinesesteelproductionupto2050underthefourdifferentscenariosdevelopedforthisstudy.Chinesesteelproductionisexpectedtodeclinefrom1,065Mtin2020to820Mtand660Mtin2050underBAUandNet-Zeroscenarios,respectively.Buildings35%InfrastructureandOtherConstruction24%Machiery16%Automobiles6%Energy4%Hardwareproducts3%Steelwoodfurniture2%Shipping1%Appliances1%Railway1%Other7%21Net-ZeroRoadmapforChina’sSteelIndustryFigure17.TheannualsteelproductionforecastforChinausedinthisstudy,2020-2050(Source:thisstudy)MaterialefficiencymeasuresMaterialefficiency,i.e.,deliveryofgoodsandserviceswithlessmaterial,isanotherkeystrategythatwillhaveanimportantimpactonChina’ssteeldemand.AsshowninTable1,multiplestrategiesexistineachoftheproductlife-cyclestages,rangingfromsteelproductdesign(e.g.,improvingdesigntohavelighterproducts,optimizingtominimizematerialuse,anddesignforlongerlife,reusabilityandeaseofhigh-qualityrecycling),steelproductmanufacturing(e.g.,improvingmaterialefficiencyintheproductionandfabricationprocesses,increasingmaterialwasterecycling),steelproductuse(e.g.,extendingthebuildingandprod-uctlifetime,intensifyingproductuse,andswitchingtootherlow-carbonalternativematerials,suchasmasstimberformid-lowrisebuildings),andsteelproductend-of-life(e.g.,increasingbuildingcomponentdirectreuse,increasingtherecyclingrateofsteelproducts,andremanu-facturingofsteelproducts).Table1.Materialefficiencymeasurestoreducesteeldemand-2004006008001,0001,2002020203020402050Crudesteelproduction(Mt/yr)BAUScenarioModerateScenarioAdvancedScenarioNet-ZeroScenarioValueChainStagesMeasuresMaterialSavingsPotential(%)ApplicabilityReferences•••22Net-ZeroRoadmapforChina’sSteelIndustryEstablishedliteraturesuggestedthatindividualmaterialefficiencystrategieshavealargematerial-savingandGHG-mitigationpotential,especiallyforsteelusedinbuildingsandvehicles.Implementingthesestrategiescansignificantlypotentialtoreducesteeldemand(Hertwichetal.2019)themoreefficientuseofthesematerialspresentsasignificantopportunityforthemitigationof(GHG).Theremaybetradeoffsbetweenindividualmaterialefficiencystrategiesandenergyefficiency.Forexample,measurestoimprovebuildingoperationalenergyefficiencyordecarbonizebuildingenergyuse,suchasadditionalinsulation,heatexchangeventilationsystem,passivesolardesign,andheatstorage,wouldlikelyincreasethematerialconsump-tionofbuildings.Increasingbuildinglifetimeswhilesavingmaterialsmayincreasebuildingoperationalenergyusewhenolderbuildingsaredesignedforlessstringentstandards.Usingwoodmaterialsalsorequiresconsiderationofthesustainability(e.g.,long-termsoilcarbondamageandreductions)andavailabilityofthematerials,whichmaylimittheapplicationsofusingmasstimberinChina.Thus,itisimportanttoconductacomprehensivelife-cycleanalysistoevaluatesuchtradeoffs.Thecostofmaterialefficiencymeasuresissparseandlimitedintheliterature.TheSixthAssessmentReportoftheIntergovernmentalPanelonClimateChange(IPCC)providedanaggregatedcostof$20-50USDpertonneofCO2eqreducedacrossallmaterialefficiencystrategiesintheindustrysector(IPCC2022).AUK-focusedstudyestimatedthatvariousmaterialefficiencymeasureswouldcostfromnegativetoabout£874($1,206USD2)pertonneofCO2eqreduced(Table2).Negativevaluesofsomeofthematerialefficiencymeasuresindicateinvestinginthesemeasuressavesmoney.Table2.Costofsteel-savingmaterialefficiencymeasures(Durantetal.,2019)MaterialEfficiencyMeasureEnd-useSectorSteelReductionCost($USD)SteelbeamreuseConstruction40%reduction$385to$1,206/tCO2SpecifyingoptimallightweightbeamsConstruction36%reduction$92to$283/tCO2ChoosingsmallercarsTransport20%reduction$-1,380to$585/tCO2Specifyinghigh-strengthsteelcarbodiesTransport12%reduction$-2,946to$-973/tCO26.2.EnergyefficiencyThereareavarietyofenergyefficiencytechnologiesthatarealreadyavailabletobedeployedonacommercialscaleinthesteelindustry.Technologiessuchaswasteheatrecoveryfordifferentprocesses,cokedryquenching(CDQ),Top-PressureRecoveryTurbinePlants(TRT),andmanyothersarecommerciallyavailablefordeployment(JISF2022a,b).Also,cutting-edgetechnologiescanassistwithenergymanagementsystems,drawingfromsmartmanufacturingandtheInternetofThings;suchtechnologiesincludepredictivemaintenanceandmachinelearningordigitaltwins3toimproveprocesscontrol(Hasanbeigietal.2013).Improvedenergyefficiencymayresultinotherbenefitsthatcomplementtheenergycostsavings,including:•Decreasedbusinessuncertaintiesandreducedexposuretofluctuatingenergycosts•Increasedproductqualityandswitchtohigheraddedvaluemarketsegments•Increasedproductivity•Reducedenvironmentalcompliancecostsrelatedtothereductionofgreenhousegasesandcriteriaairpollutants2Basedontheaverage2021exchangerates:1BritishPound=1.38USD.3Adigitaltwinisadigitalrepresentationofanintendedoractualreal-worldphysicalproduct,system,orprocessthatservesastheeffectivelyindistinguishabledigitalcounterpartofitforpracticalpurposes,suchassimulation,integration,testing,monitoring,andmaintenance.23Net-ZeroRoadmapforChina’sSteelIndustryTheexperiencesofvariousironandsteelcompanieshaveshownthatwithamodestinvestmentinenergy-efficienttechnologiesandmeasures,energyandcostsavingswithfavorablepaybackperiods(e.g.,underthreeyears)canbefound.However,forsomemajorenergyefficiencytechnologies,largeinvestmentswillbeneeded.Theselargecapitalinvestmentsmaybehardtojustifybyenergycostsavingsalone;however,additionalproductivityandproductquality,andenvironmentalcompliancebenefitscanimprovetheeconomicsofsuchaninvestment.Everyplantwillbedifferentandbasedoneachuniquesituation,themostfavorableselectionofenergyefficiencyopportunitiesshouldbemadetoaddressthespecificcircumstancesanddesignofthatplant(Worrelletal.2010).Table3showsalistofsomecommercializedenergyefficiencymeasuresandtechnologiesfortheironandsteelindustry.Table3.Examplesofcommercializedenergyefficiencymeasuresandtechnologiesfortheironandsteelindustry(JISF2022a,Worrell,etal.2010)No.Energy-EfficiencyMeasures/TechnologiesNo.Energy-EfficiencyMeasures/TechnologiesSintering32ImprovingprocesscontrolinEAF1Heatrecoveryfromthesintercooler33Refractoriesusingengineeredparticles2Reductionofairleakage34Directcurrent(DC)arcfurnace3Increasingbeddepth35Scrappreheating4Useofwastefuelinsinterplant36PlasticwasteandusedtireinjectioninEAF(emergingtechnology)5Improvechargingmethod37Airtightoperation(emergingtechnology)6Improveignitionovenefficiency38Bottomstirring/gasinjection39ContiarcFurnace(emergingtechnology)CokeMaking40ComeltFurnace(emergingtechnology)7Coalmoisturecontrol8ProgrammedheatingincokeovenCastingandRefining9Variablespeeddriveoncokeovengascompressors41Integratedcastingandrolling(Stripcasting)10Cokedryquenching(CDQ)42EfficientLadlepreheating11Nextgenerationcokemakingtechnology(SCOPE21)(emergingtechnology)ShapingIronMaking–BlastFurnace43Useofenergy-efficientmotors12InjectionofpulverizedcoalinBFto130kg/thotmetal44Installationofalubricationsystem13InjectionofnaturalgasinBF14InjectionofoilinBFHotRolling15InjectionofplasticwasteinBF45Recuperativeorregenerativeburner16InjectionofcokeovengasinBF46Flamelessoxyfuelburners17Top-pressurerecoveryturbines(TRT)47Controllingoxygenlevelsandvariablespeeddrivesoncombustionairfans18Recoveryofblastfurnacegas48Insulationofreheatfurnaces19Improvedblastfurnacecontrol49Hotcharging20Slagheatrecovery(emergingtechnology)50Processcontrolinhotstripmill21Preheatingoffuelforhotblaststove51Heatrecoverytotheproduct22Improvementofcombustioninhotblaststove52Wasteheatrecoveryfromcoolingwater23Improvedhotblaststovecontrol53WalkingbeamfurnaceforreheatingSteelmaking–basicoxygenfurnace(BOF)ColdRolling24RecoveryofBOFgasandsensibleheat54Continuousannealing25Variablespeeddriveonventilationfans55Heatrecoveryontheannealingline26ControlsystemforoxygensupplytoBOFprocess56Reducedsteamuseintheacidpicklingline27Programmedandefficientladleheating57AutomatedmonitoringandtargetingsystemsSteelmaking–EAFCross-cuttingmeasures28Convertingthefurnaceoperationtoultra-highpower(UHP)58Preventativemaintenanceinsteelmills29Adjustablespeeddrives(ASDs)onfluegasfans59Energymonitoringandmanagementsystemsinsteelmills30Oxy-fuelburners/lancing60Motorsystemsandsteamsystemsoptimization31Post-combustionoffluegases61Smartsensorsandreal-timemonitoringsystems24Net-ZeroRoadmapforChina’sSteelIndustry6.3.Fuelswitching,electrification,andgriddecarbonizationIntermsoffuelswitching,severalalternativefuels,suchasnaturalgas,biomass,biogas,andonalongertimehorizon,hydrogen,canreplacecoalorcokeasafuelorreducingagentintheironandsteelmakingprocesses.Intermsofelectrification,reheatingfurnacescanbeelectrified,andelectricinductionfurnacescanalsobescaledup.Ladleandtundishheatingcanbeswitchedtoresistance,infrared,orplasmaheating.TheuseofEAFsteelproduction,whichisalsoaformofelectrification,isnotshownundertheelectrificationpillarinouranalysis,anditisshownunderthetechnologyshiftpillar.Intermsofgriddecarbonization,allprocessesinsteelproductionthatuseelectricitycanbedecarbonizedbyusinglow-carbonelectricity.Inouranalysis,weprojectedthefuelmixusedinChina’ssteelindustry(Figure18)byshiftingtolowercarbonfuels.Forexample,intheNetZeroscenario,weassumedthecoalandcokeconsumptioninChina’ssteelindustrywillbereducedsubstantiallyby2050,andtheshareofelectricitywillincreasebecauseofashiftinproductionprocessroutestowardsEAFs,asshownearlier.Wealsoassumedasmallshareofsustainablebiomassandhydrogenforheating(inadditiontohydrogenusedinH2-DRIplants)in2040and2050.Sustainablebiomassfuelisconsideredcarbonneutraland,combinedwithCCS,willprovideacarbonsinkinthisindustry.Figure18.EnergymixprojectionsforChina’ssteelindustryundertheNet-Zeroscenario,2020-2050(Source:thisstudy)Note:TheelectricitydemandtoproducehydrogenthatisusedasareducingagentinH2-DRIisshownunder“electricity”inthisfigure.Thelargestincreaseintheshareofthetotalenergymixisforelectricity.Itsshareincreasesfrom12%in2020to47%in2050intheNet-Zeroscenario,primarilydrivenbythesubstantialincreaseintheshareofEAFfromtotalsteelproduction(from10%in2020to60%in2050undertheNet-Zeroscenario).TheshareofnaturalgasisalsoassumedtoincreasesubstantiallyduringthisperiodundertheNet-Zeroscenario.Thisispartlydrivenbytheproductionofnaturalgas-basedDRIandpartlybyoverallfuelswitchingfromcoaltonaturalgas,whichhaslowercarbonintensity.Mostofthisnaturalgaswillneedtobeimported.12%14%26%43%2%6%18%27%15%14%7%3%70%65%43%21%0%10%20%30%40%50%60%70%80%90%100%2020203020402050Shareoftotalenergyuse(%)ElectricityNaturalGasCoalCokingcoalHeatHydrogen(forheating)Biomass25Net-ZeroRoadmapforChina’sSteelIndustryAnotherkeyfactorinthedecarbonizationoftheChinesesteelindustryisthecarbonintensityoftheelectricityusedinthissector.Chinahasoneofthehighestcarbon-intensitypowersec-torsintheworldbecauseofitsheavyrelianceoncoalforpowergeneration.Figure19showsthepowersector’sCO2emissionsfactorsinmajorsteel-producingcountriesin2019.Figure19.ElectricitygridCO2emissionsfactorsinthestudiedcountriesin2019(IEA2021)AsChinashiftstomoreEAFsteelproduction,theroleofthepowersector’sCO2emissionsintensityinthesteelindustryCO2intensitywillbecomeevenmoreimportant.Figure20showsthepowersector’sCO2emissionsintensityforecastinChinaunderdifferentscenariosusedinthisstudy.WehaveassumedthatChina’spowersectorwillachievecarbonneutralityby2050undertheNet-Zeroscenario.EvenintheBAUscenario,theChinesepowersector’sCO2emissionsintensityisassumedtodropby66%between2020and2050.Figure20.ElectricitygridCO2emissionsintensityforecastinChinaunderdifferentscenarios(Source:thisstudy)00.10.20.30.40.50.60.70.8IndiaVietnamChinaSouthKoreaJapanTurkeyMexicoU.S.RussiaUkraineGermanyItalyEU-27CanadaBrazilFranceElectricitygridCO2emissionsfactor(kgCO2/kWh)-1002003004005006007002020203020402050ElectricitygridCO2intensity(kgCO2/MWh)BAUScenarioModerateScenarioAdvancedScenarioNet-Zeroscenario26Net-ZeroRoadmapforChina’sSteelIndustry6.4.Technologyshifttolow-carbonsteelproductiontechnologiesAnotherimportantpillarthatinfluencesCO2emissionsprojectionsistheshareofeachsteelproductionrouteintotalsteelproductioninChinaupto2050.Figure21showsthecontribu-tionofeachproductionroutetototalsteelproductioninChinaunderallscenariosupto2050.Figure21.Crudesteelproductionbytechnologytypeundereachscenario,2020-2050(Source:thisstudy)TohighlighttheshareofeachsteelmakingtechnologyintotalproductionintheNet-Zeroscenario,Figure22showstheshareofeachsteelproductiontechnology(as%)undertheNet-Zeroscenarioupto2050.Underthisscenario,thescrap-basedEAFproductionroutewillaccountfor60%oftotalsteelproductioninChinain2050,followedbyBF-BOFwithCCS(14%),H2-DRIEAF(13%),andDRI-EAFwithCCS(11%).Figure22.ShareofsteelproductiontechnologiesunderNet-Zeroscenarioupto2050(Source:thisstudy)Twolow-carbontechnologiesaremostimpactfulinourroadmaptoreduceGHGemissionsinChina’ssteelindustry:1)scrap-basedEAFand2)greenH2-DRI-EAFsteelmaking.Eachoftheseprocessesisdiscussedinfurtherdetailbelow.Anothertechnologythatisdiscussedbelowisinjectinghydrogen-richgasesinblastfurnaces.GiventhelargeyoungfleetofBFsinChina,thistechnologyisbeingprioritizedinthenear-to-mediumterminChina,followedbyusingenrichedhydrogenintheDRIprocess.Thiscanhelptoreducetheuseofcoalandcokein-2004006008001,0001,2002020203020402050202020302040205020202030204020502020203020402050BAUscenarioModeratescenarioAdvancedscenarioNet-ZeroScenarioCrudeSteelproduction(Mt/yr)BF-BOFBF-BOF-CCSScrap-EAFBF-EAFDRI-EAFDRI-EAF-CCSH2DRI-EAF90%76%28%1%1%12%14%5%20%40%60%5%6%6%11%1%8%13%2020203020402050Shareoftotalproduction(%)BF-BOFBF-BOF-CCSScrap-EAFBF-EAFDRI-EAFDRI-EAF-CCSH2DRI-EAF27Net-ZeroRoadmapforChina’sSteelIndustryBFsandreducetheCO2emissionsintensityofintensityproductionbyBF-BOFsinChina.Ahydrogen-DRIprocessthatisbasedonusingpurehydrogenhasbeenviewedasakeytech-nologyforthemid-to-longterminChina(CISA2022).WerecommendtheChinesegovernmenttodiscouragetheinstallationofanynewblastfur-naces(BFs)inChina.TherewillbeasubstantialincreaseindomesticsteelscrapavailabilityinChina,eveninthenearterm(by2030),thatcouldreplacetheneedfortheconstructionofnewBFs.Instead,therewillbeaneedtobuildnewEAFsteelmakingplants.TheChinesegovernmentshouldalsodiscouragethereliningofBFsasmuchaspossibleandencouragetheinstallationofH2-DRIorH2-readyDRIplantstoproduceironfromironore.ReliningBFsisasubstantiallycapital-intensiveinvestmentthatwillextendBFs’lifetimeforanother15-plusyearswhilekeepingtheircarbonemissionsalmostatthesamelevel.ReliningBFswillresultinstrandedassetsthatarenotinlinewithChina’scarbonpeakingandcarbonneutralitygoals.ThecapitalcosttorelineaBFcouldbeevenhigherthanthecapitalcostofbuildinganewDRIplant.Inaddition,asChinaandtherestoftheworldbuildafewH2-DRIplantsinthenextfewyearsandgainexperienceandconfidenceinthislow-car-bonironmakingtechnologyandasthepriceofgreenH2dropsinthecomingyearswiththelargeprogramsandincentivesinplaceinChina,theshifttoH2-DRIcouldbecomeevenmoreattractiveinthecomingyearsthanreliningBFs,anditwillcertainlybeamoreclimate-friendlyinvestment.6.4.1.ElectricArcFurnacesEAFsaremainlyusedtoproducesteelbyrecyclingferrousscrap.DRIandpigironcanalsobefedtotheEAFasascrapsubstitute.EAFsareequippedwithcarbonelectrodesthatcanberaisedorloweredthroughthefurnacerooftoprovidethenecessaryenergybyanelectricarc.EnergyconsumptioninEAF-steelmakingismuchlowerthanBF-BOFsteelmaking,astheenergy-intensereductionofironorehasalreadybeencarriedoutintheBF(orinaDRIoraSmeltingReductionplant)whenthesteelwasoriginallyproducedpriortorecycling.EAFsteelmakingcanuseawiderangeofscraptypes,directreducediron(DRI),pigiron,andmolteniron(upto30percent)asthefeedcharge.TheliquidsteelfromanEAFisgenerallysenttoaLadleMetallurgyStation(LMS)toimprovethesteelquality.RecyclingscraptomakesteelsavesvirginrawmaterialsaswellastheenergyrequiredforconvertingthemandreducestheCO2intensityofsteelproduction.Asof2021,EAFsonlyaccountedfor10.6%oftotalsteelproductioninChina(worldsteel2022),whichissignificantlybelowtheworldaverageof28%andbelowthelevelinindustrializedcountries(U.S.:70%;EU:42%;SouthKorea:32%;Japan:24%)(ChinaSteelNews2020).China’slargeBF-BOFcapacity,whichisonaveragelessthan15yearsold,limitedscrapavailability,andhighercostoftheEAF-productionprocessaresomeofthekeyfactorsthatleadtoloweradoptionofEAFsinChina.BasedontheassumedpenetrationrateofEAFsintheChinesesteelindustryandtherateofscrapusedinEAFsandBOFsunderdifferentscenarios,wehaveestimatedthescrapconsumptioninChina’ssteelindustryduring2020-2050foreachscenario.Thescrapdemandin2050undertheNet-Zeroscenarioisaround500Mt.ThisamountofscrapwillverylikelybeavailableinChinabasedonscrapavailabilityforecastsfromvariousstudies,discussedbelow.(Figure23)28Net-ZeroRoadmapforChina’sSteelIndustryFigure23.ScrapconsumptionforecastinChina’ssteelindustry,2020-2050ScrapavailabilityInChina,scrapiscurrentlyusedintwoways:1)meltedinbasicoxygenfurnaces(BOFs)alongwithmoltenironand2)melteddirectlyinEAFs.DuetothemassiveamountofsteelproductionfromBF-BOFs,around70%ofChina’sscrapiscurrentlyusedinBOFs,whileonly30%ofthescrapisusedinEAFs.Asof2021,totalscrapconsumptionbyChina’ssteelindustrywasaround252Mt(ChinaMetallurgicalNews2021).RecentstudieshaveestimatedChina’sscrapavailabilityoutlook,asshowninFigure24.TheChinaIronandSteelAssociation(CISA)projectsthattheChinesesteelindustrywillhaveabout350Mt/yearofscrapavailableby2030and500Mt/yearby2050(CISA2022).Earlyin2022,China’sMinistryofIndustryandInformationTechnology(MIIT)estimated300Mt/yearofscrapavailableforthesteelindustryby2025(MinistryofIndustryandInformationTechnology2022).Basedonsteelproductlifespansandtherecyclingrate,XuanandYue2016projectedthatChina’ssteelscrapavailabilitywillreach318Mt/yearin2030.Shangguanetal.(2020)usedtwomethodstoestimatescrapavailabilityinChina,includingtheestimationofsteelproductstocksandsteelproductlifespanandshowedthatscrapavailabilitywouldreach322-346Mt/yearby2030.TheseChineseassessmentsareinagreementwithotherinternationalstudies,includingMissionPossiblePartnership(MPP),RMI,andIEA,whichestimatedthatChina’sscrapavailabilitywillreach279to390Mt/yearby2030(MissionPossiblePartnership2021;J.Chen,Li,andLi2021;IEA2020).For2050,studiesexpectChina’ssteelscrapavailabilitytoincreasefurtherto400-600Mt/year(MissionPossiblePartnership2021;J.Chen,Li,andLi2021;IEA2020).Figure24.ScrapavailabilityoutlookforChina’ssteelindustryinotherstudies(MissionPossiblePartnership2021;J.Chen,Li,andLi2021;IEA2020)Notes:MPP=MissionPossiblePartnership;BAU=businessasusual;CISA=ChinaIronandSteelAssociation;STEPS=StatedPoliciesScenario;SDS=SustainableDevelopmentScenario;MIIT=MinistryofIndustryandInformationTechnologyofChina.-1002003004005006002020203020402050Scrapuseinsteelindustry(Mt/yr)BAUScenarioModerateScenarioAdvancedScenarioNet-ZeroScenario-1002003004005006007002020203020402050ScrapAvailability(Mt/year)MPPBAURMICISAIEASTEPSIEASDS29Net-ZeroRoadmapforChina’sSteelIndustryChina’ssteelindustryfacesseveralchallengesinimprovingtherateofscrapusage.First,highelectricitycostsandhighscrappricesmakeEAFsteelmakinglesseconomicallyattractive(ChinaSteelNews2020).StartingonJuly1,2019,importedscrapislistedasoneoftheprohibitedsolidwastestoimport.ThisrestrictsthescrapsupplyforChina’ssteelindustry.Second,China’ssteelrecyclingindustryisfragmented,withmanysmall,inefficientfacilitieswitholdtechnologies(XuanandYue2016;WübbekeandHeroth2014).Thisreducestherecyclingoutputandefficiencyaswellasquality,resultinginlower-qualityscrapwithhazardousandimpuritycontamination(Q.ZhaoandChen2011).Inaddition,thesesmallscraprecyclingfacilitiesalsofaceseveralchallengesinreceivingrecyclingincentivesinChina,suchasdifficultyaccessingtaxrebates,whichindirectlyincreasesthecostofscrap(D.GuoandZhang2021).Lastly,whilestudieshavefoundthatatthenationallevel,Chinawilllikelyhaveascrapavailabilityboomafter2030,specificscrapavailabilityvariesbyprovinceandregion.ProvincesineasternChinawillseescrapexceedingdemandaround2030,whileprovincesincentralandwesternChinawilllikelyhavemorescrapavailableafter2040(Songetal.2020).Financial,technological,andregulatorysupportcanimprovethecurrentscrapsupplysystemandincreasescrapusageinChina’ssteelindustry.Forexample,providingpreferentialtaxtreatment(e.g.,taxreliefortaxrebates)forscraprecyclingfacilities,developingrecyclingandmanagementstandards,promotingadvancedrecyclingtechnologiestoreducecontamina-tion,allowingtheimportofsteelscrap,andprovidingeconomicincentivesand/ordifferentialelectricitypricingtoEAFsteelmakerscanbeconsidered.Inaddition,nationalandprovincialcirculareconomypolicies,suchaslocalizedwastemanagementandinter-provincescrapcirculation,couldbepursued.6.4.2.Directreducediron(DRI)productionAtpresent,MIDREXandHYL/Energironarethemostwidelyavailabledirectreduction(DR)processesasalternativestoBFironproduction.TheseprocessesemployshaftfurnacesandH2-richgas(usuallyfromnaturalgas)asthereducingagent.Ifdirectreducediron(DRI)ispairedwiththeEAFtoproducesteel,itresultsinlowerCO2emissionscomparedtotheBF-BOFsteelproductionroute(Rechbergeretal.,2020).HydrogenDRI(H2-DRI)productionAnotheralternativepathwaytoachieveafurtherreductionofCO2emissionsistheutilizationofhydrogenproducedfromrenewableenergy(greenhydrogen)astheenergysourceandreducingagentfortheproductionofDRI(H2-DRI),thus,releasingH2OinsteadofCO2.HydrogendemandfortheH2-DRIprocessreportedintheliteratureis50-70kgH2for1tonneofsteel(Vogletal.,2018).Presentlythemajorityofhydrogenisproducedthroughfossilfuel-basedcarbon-intensiveprocessessuchasnaturalgasreforming,methanepartialoxidation,methanereforming,andautomaticthermalorcoalgasification.Non-fossilfuel-basedprocesseslikeelectrolysisalsorepresentasmallshareofoverallH2productionworldwide(Wangetal.,2021).Atpresent,H2-DRIiscurrentlyunderdevelopmentthroughseveralprojects,mainlyinEurope.AfewoftheprominentprojectsareshowninTable4.30Net-ZeroRoadmapforChina’sSteelIndustryTable4.H2-DRIsteelproductionprojectsaroundtheworld(SEI2022)CompanyCountry(inwhichproject/investmentistakingplace)LocationProjectscaleHydrogentypeYearOnlineSSABSwedenLuleåpilotGreenelectrolytic2021SSABSwedenGällivaredemoGreenelectrolytic2026ArcelorMittalSpainGijonfullscaleGreenelectrolytic2025H2GreenSteelSwedenSvartbynfullscaleNotstated2024POSCOSouthKoreaN/AfullscaleNotstatedNotstatedLKABSwedenKiruna,Malmberget,SvappavaarafullscaleGreenelectrolytic2029FortescueMetalsAustraliaPilbarafullscaleGreenelectrolytic2023VoestalpineAustriaDonawitzpilotNotstated2021ArcelorMittalFranceDunkirkfullscaleBlue2021ArcelorMittalGermanyEisenhüttenstadtpilotGreenelectrolytic2026TataSteelNetherlandsIjmuidenfullscaleNotstated2030Currently,ChinaonlyhasafewDRIprojects,withmostofthemusingH2-richgasescomingfromcokingorotherindustrialprocesses,asshowninTable5.Forexample,HebeiIronandSteelGroup(HBIS),theseventh-largeststeel-producingcompanyintheworld,signedacontractwithTenovain2020todevelopaDRIplantwithatotalcapacityof0.6Mt/yearusingenrichedcoke-ovengasthathasa70%hydrogenconcentration(Tenova2020;TheInternationalEnergyNet2021).HBISalsoplanstodevelopasecond-stageDRIplant,with0.6Mt/yearincapacity,usinggreenhydrogen(TheInternationalEnergyNet2021).ThelargeststeelproductioncompanyinChinaandtheworld,BaowuSteel,isbuildingaDRIfacilityinitsZhanjiangSteelfacility.Withatotalinvestmentof¥1.89billionRMB(US$293million4),theprojecthasatotalcapacityof1milliontonnesperyear(NE212022).4Exchangerateusedinthisstudy:theaverage2021exchangerate,i.e.,1USDollar=6.45ChineseYuan(renminbi,orRMB).Source:https://www.macrotrends.net/2575/us-dollar-yuan-exchange-rate-historical-chart31Net-ZeroRoadmapforChina’sSteelIndustryTable5.DRIproductionprojectsinChinaProjectNameApplicationsSteelCompanyCapacityProjectStatusCompanySteelRoadmapParadigmProjectCOGsyngasDRIand(future)greenH2DRIHebeiIronandSteelGroup(HBIS)1.2milliontonnesperyearintwostages.Plantooperatethe1ststageby2021Pledgedtoreachcarbonpeakingby2022andachievecarbonneutralityby2050Zero-carbonsteelpilotH2DRIandin-dustrial-scaleproductionofH2andCOGBaowuSteel(ZhanjiangSteel)1milliontonnesperyearPlantocompleteconstructionbytheendof2023Pledgedtoreachcarbonpeakingby2023andachievecarbonneutralityby2050H2MetallurgicalProjectIndustrialbyproductsyngasDRIRizhaoSteel500,000tonnesDRIperyearLaunchedinMay2020NotavailableJianlong-InnerMongoliaSaisipuCompanyH2DRIprojectCOGsyngasDRIJianlongSteel300,000tonnesperyearCompleted156tonnesinapilotprojectin2021Pledgedtoreachcarbonpeakingby2025andachievecarbonneutralityby2060GreenHydrogenZeroCarbonFluidizedBedH2-basedfluidizedbedpilotAngangSteel>10,000tonnesperyearPlantooperatein2023Pledgedtoreachcarbonpeakingby2025andbecomeoneofthefirstcompaniestoachievecarbonneutralityHydrogenMetallurgyResearchInstituteH2metallurgicalapplicationsJiugangSteelResearchinstitution–productioncapacitynotapplicablenotavailableEstablishedinSeptember2019NotavailableLow-CarbonHydrogenMetallurgyResearchInstituteR&Donhydrogenandlow-carbonmetallurgyBaogangSteelEstablishedinJuly2021Pledgedtoreachcarbonpeakingby2023andachievecarbonneutralityby2050RizhaoSteel,aprivatesteelcompanyinShandongProvince,launcheditshydrogenmetallurgicalprojectin2020.Usingindustrialbyproductsyngas(theprocessusesnaturalgasasfeedstocktoproducevinylacetate),theprojectaimstoproduce0.5Mt/yearofDRI(Zhong2020).JianlongSteel,China’sfifthlargestprivatesteelcompany,invested¥1.09billionRMB($169millionUSD)indevelopingaDRIprojectwithatotalcapacityof0.3Mt/year.Thesourceofhydrogencomesfromcokeovengas.AsofApril2021,JianlongSteelhasproducedthefirstbatchof156tonnesofDRI(CSteelNews2021).InadditiontopilotDRIprojects,Chinesesteelcompanies,suchasBaowuSteel,JiugangSteel,AngangSteel,andBaogangSteel,developedresearchinstitutesand/orjointagreementstofocusontheresearch&developmentofhydrogenmetallurgicalinnovationsandtechnologies.6.4.3.Injectinghydrogen-richgasesintotheblastfurnaceGlobally,injectinghydrogen-richgasinblastfurnaceshasbeentestedinJapan,Germany,Sweden,andChina.InJapan,undertheCO2UltimateReductionSystemforCoolEarth50(COURSE50)project,byproducthydrogen(cokeovengas)wasinjectedintoanexperimentalblastfurnace(TheJapanIronandSteelFederation2021b).Itisreportedthatintheexperimentalblastfurnace,a10%reductionofCO2emissionswasachievedin2021(TheJapanIronandSteelFederation2021a).IntheSuperCOURSE50,initiatedbytheJapaneseIronandSteelFederationin2020,theJapanesesteelcompanieswillfurtherincreasetheuseofhydrogeninblastfurnacesbyusingpurchasedhydrogenfromoutside(TheJapanIronandSteelFederation2021c).32Net-ZeroRoadmapforChina’sSteelIndustryTheCOURSE50projectalsotestedtheuseofcokeovengas(COG)andreformedCOGinanexperimentalblastfurnace(EBF)locatedinLulea,Sweden.TheEBFisownedbytheSwedishminingcompanyLKAB.Thetestresultsshowedonlya3%reductioninCO2emissions,limitedbytheavailableCOGproductionrate(Nishiokaetal.2016).Thyssenkruppfinisheditsfirststageoftestingbyinjectinghydrogeninoneofthe28tuyeresofits“BlastFurnace9”inDuisburg,Germany.Theinjectedhydrogen,suppliedbyAirLiquideanddeliveredbytruck,reachedthedesignedvolumeof1000m3perhour.Inthesecondstageoftheproject,whichisexpectedtostartin2022,Thyssenkruppplanstoexpandthetesttoallofthe28tuyeres.Itisalsoexpectedtoreceivehydrogenbypipeline(Thyssenkrupp2021).ThyssenkrupphasmorerecentlycommittedtoreplacingitsblastfurnaceswithDRIplantscombinedwithasubmergedarcfurnace(SAF)in2025,allowingittouseblast-furnacegradeironoreintheprocess.TheSAFwillmeltthespongeironbeforeitgoestoThyssenKrupp’sexistingBOFforsteelmaking.ArcelorMittalisalsoplanningtoimplementasimilarDRI-SAFcombination(NicholasandBasirat,2022).Chinesesteelcompaniesarealsointerestedinapplyinghydrogen-richgasesintheBFtoreducecokeconsumptionandmitigateemissions.Earlyin2017,XingtaiIronandSteelCompany,locatedinHebeiProvince,pilotedhydrogen-richironmakingtechnologyincollaborationwiththeChinaIronandSteelResearchInstitute.Thehydrogen-richgasisfromcokeovengasproducedonsite(XingtaiIronandSteelCompany2017).BaowuSteel,thelargeststeelcompanyinChinaandtheworld,launcheditshydrogen-richcarboncirculationBFprojectinOctober2020.Itisreportedthattheprojecthascompletedthefirstandsecondstagesoftesting,reachedthegoalofutilizinghydrogen-richgas(50%hydrogeninsyngas),andachieveda15%CO2intensityreductiontarget(Wang,2022).Theprojectisnowinthethirdstage,whichaimsatreducingCO2intensityby30%intheblastfurnaceprocess.ShanxiJinnanSteel,workingwiththeChinaIronandSteelResearchInstitute,implementedhydrogeninjectionontwoofitsblastfurnacesinApril2021.Eachblastfurnacehasavolumeof1860m3.TheprojectisthefirstcontinuousindustrialexperimentonlargeblastfurnacesinChina.Theprojectreportedreducingcokeuseby6.5kgpertonneofironandcoaluseby29.5kgpertonneofiron(ChinaBaowuNews2022).Table6providesasummaryofcompletedandongoingpilotsrelatedtoinjectinghydrogen-richgasinblastfurnacesintheworld.33Net-ZeroRoadmapforChina’sSteelIndustryTable6.PilotprojectsofhydrogenapplicationinblastfurnacesProjectNameH2ApplicationSteelCompany/ConsortiumCountryProjectStatusCOURSE50Cokeovengas(COG)injectioninblastfurnaceTheJapanIronandSteelFederation(JISF)JapanTestscompletedin2021;reachedgoalof10%CO2emissionreductionCOURSE50COGinjectioninblastfurnaceLKABandJISFSwedenTestscompletedin2012;reducedCO2emissionsby3%SuperCOURSE50OutsourcedH2injectioninblastfurnaceTheJapanIronandSteelFederationJapanBeganin2020H2StahlprojectOutsourcedH2(trucked)injectioninblastfurnacethyssenkruppGermanyTestingbeganin2019;thefirststagewascompleted.H2StahlprojectOutsourcedH2(viapipeline)injectioninblastfurnacethyssenkruppGermanyPlantostartin2022Low-carbonhydrogen-richironmakingCOGinjectioninblastfurnaceXingtaiSteelChinaBeganin2017Hydrogen-richcarboncirculationblastfurnaceCOGinjectioninblastfurnaceBaowuSteel(BayiSteel)ChinaBeganin2020,achieveda15%CO2emissionreductionasof2021BlastfurnacehydrogeninjectionH2-injectioninblastfurnaceShanxiJinnanIronandSteelGroupChinaBeganin2021,reducedCO2emissionsby10%Sources:(TheJapanIronandSteelFederation2021a,50;2021b;Nishiokaetal.2016;thyssenkrupp2021;XingtaiIronandSteelCompany2017;Wang2022;ChinaBaowuNews2022).6.4.4.HydrogendemandinChina’ssteelindustryAsdiscussedearlier,asubstantialamountofhydrogenproductionisneededtosupplyhydrogenforironandsteelproductionprocessesbyBF-BOFandH2-DRI.Figure25showsthetotalhydrogendemandfortheChinesesteelindustryunderdifferentscenarios.IntheNet-Ze-roscenario,0.6MtofhydrogenisneededinthesteelindustryinChinain2030.Thehydrogendemandwillincreasetoaround5Mtin2040and6Mtin2050underthisscenario.Figure25.TotaladditionalhydrogendemandfortheChinesesteelindustryunderdifferentscenarios(source:Thisstudy)-2.04.06.08.02020203020402050H2Demand(MtH2/yr)BAUScenarioModerateScenarioAdvancedScenarioNet-ZeroScenario34Net-ZeroRoadmapforChina’sSteelIndustryInouranalysis,weassumethatthehydrogenusedintheChinesesteelindustrywillbegreenhydrogen.WhiletheuseofgreenhydrogendecreasesCO2emissions,electricitydemandincreases.Figure26showstheadditionalannualelectricityconsumptionforgreenhydrogenproductionfortheChinesesteelindustryunderdifferentscenarios.Hydrogenproductiontomeetthesteelindustry’sdemandinChinaincreasesannualelectricityconsumptionof32,272,and342TWh/yearin2030,2040,and2050,respectively,intheNet-Zeroscenario.Thistranslatesintoanincreaseinelectricityloaddemandof13,113,and143GWinChinain2030,2040,and2050,respectively,underthisscenario(Figure27).Forcomparison,in2021,Chinahadaround2,380GWofpowergenerationcapacity.Also,theannualcapacityofrenewablepowergenerationinChinareached1200GWin2021.Chinaadded120GWofnewrenewablecapacityin2021alone(USEIA2022).Toestimatetheseadditionalloads,weassumedalloftheadditionalloadiscomingfromclean,renewableenergysources.Figure26.AdditionalannualelectricityconsumptionforgreenhydrogenproductionfortheChinesesteelindustryunderdifferentscenarios(source:Thisstudy)Figure27.AdditionalREpowergenerationcapacityisneededforgreenhydrogenproductionfortheChinesesteelindustryunderdifferentscenarios(source:Thisstudy)-1002003004002020203020402050AnnualelectricityconsumptionforH2production(TWh/yr)BAUScenarioModerateScenarioAdvancedScenarioNet-ZeroScenario-3060901201502020203020402050REelectricitypowergenerationloadforH2production(GW)BAUScenarioModerateScenarioAdvancedScenarioNet-ZeroScenario35Net-ZeroRoadmapforChina’sSteelIndustryInadditiontoinvestmentinrenewablepowergenerationanddistribution,substantialcapitalinvestmentisneededtosignificantlyincreasehydrogenproductioncapacityinChina.Figure28showsourestimateforthenumberof100MWelectrolyzersforhydrogenproductionfortheChinesesteelindustryunderdifferentscenarios.ThestatusofhydrogenproductionandrelatedpoliciesandplansinChinaisdiscussedlaterinthisreport.Figure28.Numberof100MWelectrolyzersforhydrogenproductionfortheChinesesteelindustryunderdifferentscenarios(source:Thisstudy)TheuseofgreenhydrogeninthesteelindustryhasthepotentialtoreduceCO2emissionswhentheelectricitygridisdecarbonized,buttheinfrastructureandcompetingdemandsforrenewableelectricityresourcesposechallengestorealizingthesereductionsinChina.InvestingintheelectricitygridandincreasingtheshareofrenewableenergyinthepowersectorenergymixwillhelpacceleratetheuseofgreenhydrogenandcontributetoareductioninCO2emissions.Theelectricitygridisacomplex,interconnectedsystemlinkinggenerationresourcestocustomerswithvaryingandvariableelectricityneeds.ElectricitygenerationfromrenewableresourceshasincreasedsubstantiallyovertimeinChina,butChina’selectricitygridisverycarbon-intensive.Managingthegrid’sresources,infrastructure,andenergyflowsisaconsiderableundertakingthatwillcontinuetobecomplicatedbytrendstowardmoredistributedgenerationresourcesandrenewableresources.AdditionalpressurewillbeplacedonChina’salreadystrainedgridsystemasmultiplesectors,suchastransportation,buildings,andindustry,movetoelectrifyandaccessrenewableresourcesinordertoreducetheiremissions.Todeliverelectrificationatscale,investmentswillbeneededtobuildorupgradekeyinfrastructure,includingrenewableelectricityproduction,energytransmission,anddistributionnetworks,andend-us-erinfrastructure.Developingacoherentpowersectorstrategyisessentialtoacceleratethepaceofpowersectordecarbonizationwhichisaprerequisitetotheuseofgreenhydrogeninindustry.Utilities,policymakers,industry,andotherstakeholdersshouldpayattentiontothispotentialincreaseindemandforrenewableelectricity,andtheassociatedneedformorerenewableelectricitygeneration,additionalenergystorage,demandresponseprograms,transmissionanddistributionsystemexpansion,andgridmodernization.EnsuringthatsufficientrenewableresourcesarebroughtonlineandconnectedtodemandcenterswillbecriticalforasmoothenergytransitionandrapidmultisectorelectrificationandbeneficialuseofgreenhydrogeninChineseindustry.-4008001,2001,6002020203020402050Numberof100MWelectrolizerplantsBAUScenarioModerateScenarioAdvancedScenarioNet-ZeroScenario36Net-ZeroRoadmapforChina’sSteelIndustry6.4.4.HydrogenproductioninChinaThemostimportantobstaclefacedbyH2-DRIproductionistheproductionoflow-carbonhydrogenatlargequantitiesataneconomicalprice.Thereisaneedforincreasedeffortindesigningsolutionsforlow-costgreenhydrogenaswellassafehydrogentransportandstorage.CurrentHydrogenProductioninChinaChinacurrentlyproducesabout33Mtofhydrogen,thelargestproducerintheworld(Bai2022).AccordingtoChina’snationalstandardonhydrogenquality(GB/T3634.1-2006),industrialgrade(H2purity>99%)H2productionisabout12Mt(CNIS2020).China’scurrenthydrogenproductionreliessignificantlyonfossilfuels,mainlycoal.Morethan62%ofChina’shydrogenisproducedfromcoalorcoalproducts,andrenewable(orgreen)H2onlyaccountsfor1-3%(H2weilai2021).Naturalgas-basedhydrogenproductionaccountsfor19%.Thisisverydifferentfromthefuelmixinglobalhydrogenproduction,wherenaturalgassteammethanereformingaccountedfor76%oftotalproductionin2018(IEA2019).ThemajorityofChina’scurrenthydrogenproducersareintheheavyindustryandenergysectors.About21MtofChina’stotalhydrogenproductionisfromdedicatedhydrogenproductionprocessesinindustrialsites,suchasammoniaproduction,oilrefining,methanolproduction,andotherchemicalandmetalproductionprocesses(Figure29).Theseprocessesrequirehydrogenwithonlysmalllevelsofotheradditivesorcontaminants.Another12MtofChina’stotalhydrogenproductionisgeneratedasindustrialbyproducts,oftenamixtureofhydrogenandothergases(synthesisgases),andproducedmainlyfromthesteelindustry,Chlor-alkaliindustry,andotherchemicalprocesses(Dengetal.2010;Verheul2019).Thecokingprocess,wherecoalisheatedinanoxygen-freeconditiontoproducecoke,isakeyprocessintheprimarysteelmaking.Thecokingprocessnotonlyproducesthereducingagentforironmakingintheblastfurnacebutalsoproducescokeovengasasabyproduct.Generallyspeaking,about1tonneofcokecanproduce400-426m3ofcokeovengas,whichcontainsmostlyhydrogen(54-69%),methane(23-28%),carbonmonoxide(5.5-7%),CO2(1.2-2.5%),andotherunsaturatedhydrocarbon(Dengetal.2010;ChinaEV1002020).BasedonthecurrentlevelofcokeproductioninChina,weestimatethatChina’ssteelindustryproducesabout6-7Mtofhydrogenfromthecokingprocess,asshowninFigure30.Figure29.HydrogenProductioninChinain2018Note1:Coke-ovengas(COG),abyproductofthecokingprocess,hasarelativelylargefractionofhydrogen(H2).However,mostCOGiscombustedtoproduceheatandpower.AstheshareofBF-BOFsteelmaking,whichrequirescoke,declinessubstantiallyinChinaincomingyearsanddecades,theamountofCOGwilldeclinesubstantiallytoo.Therefore,proposalstorecoverandpurifyH2fromCOGarelessrelevant.Note2:othersectorsinclude:otherchemicalprocessing,metalproduction,electronics,foodprocessing,pharmaceuticals,glassmanufacturing,laboratoryresearch,andaeronautics&astronautics0510152025Hydrogen(pure)[Dedicatedhydrogenproduction]Hydrogen(mixture)[By-producthydrogen]H2Production(MtH2/yr)AmmoniaMethanolOilRefiningOtherOtherChlor-AlkaliSteel(Coking)37Net-ZeroRoadmapforChina’sSteelIndustryChina’sHydrogenIndustryDevelopmentPlanInMarch2022,ChinareleaseditsfirstHydrogenIndustryDevelopmentMid-LongTermPlan(2021-2035)(NDRCandNEA2022).TheplanmakesitclearthathydrogenwillbeapartofChina’senergysupplysystemsandemphasizesthecoordinated“supplychain”developmentofhydrogenproduction,storage,transportation,andutilization,especiallyinthetransportationandindustrialsectors.TheChinesegovernmentnotonlyviewshydrogenplayingakeyroleinprovidingcleanandlow-carbonenergy,butalsoseesthehydrogenindustryasastrategicindustryforstructuralupgradesandeconomicgrowth.Undertheplan,by2025Chinawouldhavethecoretechnologiesandproductionprocessesofhydrogenproductionreachatotalof50,000fuelcellvehicles,deployhydrogenrefuelingstations,andproducerenewable-basedhydrogento100,000to200,000tonnesperyear.By2030,thegovernmentaimstohaveacompletehydrogenindustrytechnologicalinnovationsystem,cleanhydrogenproduction,andsupplysystemtosupportChina’scarbonpeakinggoal.By2035,thegovernmentenvisionsthathydrogenwouldhavediverseapplicationsandthattheshareofrenewable-basedhydrogenwouldincreasesignificantly(NDRCandNEA2022).AccordingtotheindustrygrouptheChinaHydrogenAllianceby2030China’shydrogendemandwillreach35Mt,anditwillrequirearound5%ofChina’sfinalenergyconsumptiontoproducethatamountofhydrogen(ChinaHydrogenAlliance2019).Thesharewillincreaseto10%by2050.By2060,China’stotalhydrogendemandwillincreaseto60Mt,withtheindustrialsectorconsuming34Mt,mostlyintheironandsteelindustry(ChinaHydrogenAlliance2019).Chinaisbuildingsomeofthelargesthydrogenproductionfacilitiesintheworld.AsofJuly2022,wehaveidentifiedatotalof40hydrogenproductionprojects(Figure30)thateitherhavebeendevelopedorareunderdevelopment.Manyoftheseprojectsbeganconstructionin2020or2021,andareexpectedtostartoperationinlate2022or2023.Themajorityoftheprojects(34)producehydrogenfromsolarPV,solarthermal,wind,oracombinationofrenewablesources.Theotherprojectsrelyonhydropowerforhydrogenproduction.Outofthe40projects,4projectsareproducinghydrogenfromeithercokeovengas,naturalgas,orasanindustrialbyproduct.OneofthelargesthydrogenproductionprojectsinChinaisthePV-greenhydrogenprojectinKuqa,Xinjiang.TheprojectwaslaunchedonNovember30,2021,withatotalproductioncapacityof20,000tonnesperyear.Withatotalinvestmentof3billionRMB($465millionUSD5),theprojectincludesPVpowergeneration,powertransmissionanddistribution,waterelectrolysisforhydrogenproduction,hydrogenstorage,andhydrogentransportation.ExpectingtohavetheprojectinoperationbyJune2023,thegreenhydrogenproducedwillbeusedinSinopec’sTaheRefining&ChemicalCompanytoreducethecurrentnaturalgasconsumption(XinhuaNet2021).5Basedon2021averageexchangeratebetweenUSdollarsandChineseyuan(RMB),1USD=6.45RMB.https://www.macrotrends.net/2575/us-dollar-yuan-exchange-rate-historical-chart38Net-ZeroRoadmapforChina’sSteelIndustryFigure30.HydrogenProjectsinChina(varioussources)About40%ofplannedandongoinghydrogenproductioncapacityisconcentratedinInnerMongolia,duetoitsrichsolarandwindresources(Table7).Another30%oftheannouncedhydrogenproductioncapacityislocatedinShanxiandXinjiang.Atthisstage,coastalregionshaveamuchsmallproductioncapacitydeveloped,asshowninGuangdongandZhejiangprovinces.ThelocationsofChina’shydrogendevelopmentmatchquitewellwithChina’splanstodevelopcleanenergybases.Inthe14thFive-YearPlan,thecentralgovernmentidentifiednineon-landcleanenergybases,asshowninFigure31,includingSongliaoCleanEnergyBase(Heilongjiang,Jilin,andLiaoning),JibeiCleanEnergyBase(NorthernHebei),YellowRiverJiziwan(n-shapebent)CleanEnergyBase(NingxiaandInnerMongolia),HexiCorridorCleanEnergyBase(Gansu),UpperYellowRiverCleanEnergyBase(Qinghai),UpperJinshaRiverCleanEnergyBase(Sichuan),YalongRiverCleanEnergyBase(Guizhou),andLowerJinshaRiverCleanEnergyBase(Yunnan).Inaddition,coastalregions’hydrogendevelopmentisalsoinlinewiththecentralgovernment’splantodevelopoffshorewindenergybasesinGuang-dong,Fujian,Zhejiang,Jiangsu,andShandong.Table7.AnnouncedhydrogenproductioncapacityinChinabyprovinces(varioussources)Province/AutonomousRegionAnnouncedHydrogenProductionCapacity(Nm3/hour)ShareofTotal(asofJuly2022)InnerMongolia139,62540%Shanxi67,50019%Xinjiang38,30011%Jilin30,7009%Yunnan23,5007%Ningxia20,0006%Gansu9,9603%Hebei6,6002%Sichuan6,0002%Shandong5,6002%Guangdong1,5500.4%Zhejiang8000.2%Total350,00010039Net-ZeroRoadmapforChina’sSteelIndustryFigure31.CleanenergyproductionbasesinChina(Myllyvirta,Zhang,andPrater2022)Chinaisalsomovingforwardininvestingandmanufacturingelectrolyzers.AccordingtotheInternationalEnergyAgency(IEA),Chinaaccountedfor8%oftheglobalstockofelectrolyzers(295MW)and35%ofthetotalmanufacturingcapacityofelectrolyzerequipmentandcomponentsintheworld(IEA2021).Thestate-supportedindustrygroup,ChinaHydrogenAlliancecalledforreaching100GWofrenewablehydrogenproductionby2030(Argus2021).Figure32showsthelocationofsteelplantsandhydrogenproductionprojectsinChina.Figure32.ThelocationofsteelplantsandhydrogenproductionprojectsinChina(Sources:GlobalEnergyMonitorandauthoranalysis.)40Net-ZeroRoadmapforChina’sSteelIndustryCostofhydrogenproductioninChinaAsshowninTable8,greenhydrogenproductioncostinChinaistypicallyabout¥20-40yuan($3.1-6.2USD)perkg,butcanbehigher,ataround¥48.5yuan($7.5USD)perkg(X.Zhao2022;ChinaHydrogenAlliance2020;W.Chen2021).HydrogenproducedfromcoalinChinacostsabout¥6-12yuan($1-1.9USD)perkg(W.Chen2021).Thecostofhydrogenthatisproducedfromindustrybyproductisintherangeof¥10-27yuan($1.6-4.2USD)perkg(ChinaHydrogenAlliance2020;W.Chen2021).Variousstudies(seeTable8)fromChinaexpectgreenhydrogencosttodecrease,reaching¥25yuan($3.9USD)perkgby2025(ChinaHydrogenAlliance2021).Greenhydrogencostisexpectedtobeintherangeof¥15-22yuan($2.3-3.5USD)perkgby2030,andfurtherdeclinestobelessthan¥10yuan($1.5USD)perkg(ChinaHydrogenAlliance2021;W.Chen2021).Table8.HydrogenProductionCostinChinaYearGreenH2Coal-basedH2H2fromindustrybyproductSource¥Yuan/kg$USD/kg¥Yuan/kg$USD/kg¥Yuan/kg$USD/kg2020¥20-30$3.1-6.2¥7-9$1.1-1.4(X.Zhao2022)2020¥30-40$4.7-6.2¥8.85$1.40¥10-16$1.6-2.5(ChinaHydrogenAlliance2020)2020¥9.2-48.5$1.4-7.5¥6-12$0.9-1.9¥14.6-26.9$2.3-4.2(W.Chen2021)2025¥25$3.90----(ChinaHydrogenAlliance2021)2030¥15$2.30----(ChinaHydrogenAlliance2021)2030¥21.56$3.30¥13.33$2.10--(W.Chen2021)2040¥14.46$2.20¥15.63$2.40--(W.Chen2021)2050¥<10$<1.6----(ChinaHydrogenAlliance2020)2050¥9.7$1.50¥18.32$2.80--(W.Chen2021)6.5.Carboncapture,utilization,andstorageCarboncapture,utilization,andstorage(CCUS)canbeusedtodecarbonizedifferentsteelproductionroutes,suchastop-gasrecyclinginblastfurnaceswithCCUS,DRIwithpost-com-bustionCCUS,andoxygen-richsmeltreductionwithCCUS,etc.TheseCCUStechnologiesvarygreatlyintheircommercializationstatus,withmostofthemcurrentlyatthepilotstage.ThemainchallengesforCCUStechnologiesareachievingfurtherreductionsincostsandimprovingoperationalefficienciesaswellashavingsuitableCO2transportsystemsandstoragesites.ThecapturedCO2emissionsfromironandsteelproductioncanbepermanentlystoredunderground(dependingongeology),orusedtoproducechemicals,fuels,constructionmaterials,etc.41Net-ZeroRoadmapforChina’sSteelIndustryInouranalysis,weassumedvariousadoptionratesofCCUStechnologiesinChina’ssteelindustryacrossscenariosforbothBF-BOFsteelmakingandconventionalDRIplants.Itshouldbenotedthatpost-combustioncarboncapturetechnologiescanreachupto95%captureefficiency,butbecauseofthestructureofsteelplantsanddifferentemissionspointsourcesinproductionandtheleakagethathappensduringcarboncapture,itishardtoreachthathighcaptureefficiencyinsteelplants.Figure33showstheCO2emissionscapturedbytheadoptionofCCUSinChina’ssteelindustry.Figure33.TheCO2emissionscapturedbytheadoptionofCCUSinChina’ssteelindustry(CCUSisappliedaftertheadoptionofotherdecarbonizationtechnologies)(Source:thisstudy).CCUSstatusintheglobalsteelindustryGlobally,theAlReyadahproject,locatedintheEmiratesSteelcomplexatMussafah,UnitedArabEmirates(UAE)istheonlycommercialsteelindustrycarboncaptureproject.Theproject,withaseedcapitalof$15billionUSD,isajointventurebetweenAbuDhabiFutureEnergyCompany(Masdar)andAbuDhabiNationalOilCompany(ANDOC)(MIT2016).CO2emissionsarecapturedfromaDRIplantusingatraditionalmonoethanolamine(MEA)absorptionandrecoverysystem(Zahra2015).TheCO2-richwastestreamisthendehydrated,compressed,andpiped43kmforonshoreenhancedoilrecovery(EOR)(ScottishCarbonCapture&Storage2022).Theprojecthasbeenoperatingsince2016withthecapacitytocapture800,000tonnesofCO2peryear(ADNOC2017).PilotsarebeingconductedtotesttechnologiestocaptureCO2emissionsfromsteelmanufacturingprocesses.CompaniesinJapan(e.g.,NipponSteel)andEurope(e.g.,ArcelorMittalandSSAB)aretestingcapturingCO2emissionsfromBFs.ThesecarboncaptureprojectsareinpilotstageswithmuchsmallerCO2capturingcapacity,rangingfrom6tonnesperdayto14tonnesperday.IntermsofCO2storage,NipponSteelsignedajointstudyagreementwithdeepCStoretoevaluatethecommercialfeasibilityofcapturingandtransportingliquefiedCO2.TheCO2willbesuppliedbyNipponSteel,shippedtoaCO2FloatingStorageandInjection(FSI)hubfacilityinoffshoreAustralia,andtheninjectedsubsurfaceneartheFSIfacility(NipponSteel2022).SteelcompaniesarealsoexploringturningCO2intoproducts,suchaschemicals,plastics,andfuels.Forexample,ArcelorMittalisworkingwithLanzaTechtodemonstrateaCCUtechnologyatanindustrialscale.Theproject(calledtheSteelanolproject)willproduceethanolfrom-3060901201501802020203020402050CO2captured(MtCO2/yr)BAUScenarioModerateScenarioAdvancedScenarioNet-ZeroScenario42Net-ZeroRoadmapforChina’sSteelIndustrycarbon-richwastegasesfromthesteelplantinGhent,Belgium(ArcelorMittal2021).Theprojectisexpectedtobeinoperationbytheendof2022andproduce80millionlitersofethanol,whichwillbeblendedwithgasolinefortransportfuel.ArcelorMittalexpectstheprojecttoreduceCO2emissionsby125,000tonnesperyear(ArcelorMittal2021).InGermany,ThyssenkrupphasinitiatedtheCarbon2Chemprojectinvolving16partners.Theproject,withfundingsupportfromtheGermanMinistryofEducationandResearch,beganin2016.By2018,ithadutilizedCO2fromtopgasestoproduceammonia,methanol,andalcoholsinitspilotplant(Thyssenkrupp2020).TheprojectisnowinthesecondphasetoincludeCO2emissionsourcesfromothersectors,suchascementandlimeproductionandwasteincinerationplants(Thyssenkrupp2020).Table9providesalistofcurrentCCUSprojectsinthesteelindustryinternationally(excludingChina).Table9.GlobalSteelIndustryCCUSProjectsProjectNameTypeofProjectCO2CapturingCapacitySteelCompanyCountryProjectStatusAlReyadahCO2CapturingandEORMEAabsorption;800,000tonnesperyear(21,918tonnesperday)EmiratesSteelUAECommercial(operationbeganin2016)CO2UltimateReduc-tioninSteelmakingProcessbyInnovativeTechnologyforCoolEarth50(COURSE50)CO2capturingChemicalabsorption;30tonnesperdayPhysicalabsorption;6tonnesperdayKimitsuIronWorksFukuyamaIronWorksJapanTestingandPilotDMX™DemonstrationCO2capturing12tonnesperdayArcelorMittalDunkirk,FrancePilot(operationbeganin2022)STEPWISEPilotofSEWGSTechnologyCO2capturingSolidsorption;14tonnesperdaySSABLuleå,SwedenPilot(operationbeganin2017)SteelanolProjectCO2capturingandutilization125,000tonnesCO2peryearArcelorMittal(withLanzaTech)Ghent,BelguimPilot(expectedcommissionbyendof2022)Carbon2ChemprojectCO2capturingandutilizationGoalistoreduce30%CO2by2030ThyssenkruppDuisburg,GermanyPilot(beganin2016,re-ceivedfundingthrough2024)OffshoreCO2storageCO2transpor-tationandstorage1-5milliontonnesofliquefiedcarbonNipponSteelJapan/AustraliaFeasibilitystudySources:(GlobalCCSInstitute2022;NipponSteel2022;ArcelorMittal2021;Thyssenkrupp2020)CCUSstatusintheChinesesteelindustryBasedonpersonalcommunicationswithseveralChina’ssteelexperts,itseemsthattheChinesesteelindustryismoreinterestedinCO2utilizationthanCO2storage.Inthesteelmakingprocess,CO2canbeusedforstirring,temperaturecontrol,shielding,anddilutioninblastfurnaces,basicoxygenfurnaces,electricarcfurnaces,andcontinuouscasting.43Net-ZeroRoadmapforChina’sSteelIndustryChina’sShougangJingtangCompanyhasutilizedCO2inthedephosphorizationprocessofBOFs(top-blowingCO2)tocontrolthereactiontemperatureandcreatefavorableconditionsforthedephosphorizationprocess(K.DongandWang2019).Bottom-blowingCO2inconvertershasbeenfoundbeneficialwhencomparedtoalternativessuchasargon(highercost)andnitrogen(potentiallyharmful).ShougangJingtangwillalsobepilotingthisprojectasoneoftheCCUSpilotprojectsinHebeiProvince(HebeiGovernment2021).Itisestimatedthattheprojectwillcaptureatotalof50,000tonnesofCO2peryear.DelongSteelwillbepilotingaCCUprojectwithatotalcapacityof140,000tonnesperyear.TheprojectwillcapturewastegasesfromthehotstovesoftheBFsandutilizeCO2toproducenano-calciumcarbonate(HebeiGovernment2021).BaotouSteelGroupisworkingwithColumbiaUniversityonsteelslagutilizationwhichhascarbonsequestrationcapabilities.Duringthechemicalprocess,steelslagisconvertedintovaluablematerialstobeusedinvariousindustrieswhiletheprocessalsoutilizesCO2emissions.Thisproject,whichbeganin2015,isoneofsixUS-ChinaEcoPartnershipprojects.Thedemonstrationprojectcanutilize424,000tonnesofsteelslagperyearandsequester100,000tonnesofCO2annually(MinistryofScienceandTechnology2021).StartinginJune2022,BaotouSteelbeganbuildingaCCUSdemonstrationprojectatatotalcapacityof2milliontonnesofCO2.Thefirstphaseoftheprojectcaptures500,000tonnesofCO2emissionsfromindustrialwastegases.ThecapturedCO2willpartlybepipedasaninputforthesteelslagutilization,andotherCO2willbetruckedforEORinnearbyoil/gasfiled,aftercompressingandliquefication(BaotouSteel2022).China’ssteelindustryhasconductedonefeasibilitystudyonCO2capturingandstorage.ShougangJingtangCompany,workingwithToshiba,TongfangEnvironment,andGlobalCCSInstitutestudiedthefeasibilityofapplyingpost-combustionCCStechnologyandusingCO2forEORatanearbyoilfield(ToshibaInternationalCorpandTongfangEnvironment2015).Table10summarizestheCCUSprojectsinChina’ssteelindustrytodate.Table10.CCUSProjectsinChina’sSteelIndustryProjectNameTypeofProjectCO2CapturingCapacitySteelCompanyCountryProjectStatusCaofeidianProjectCO2capturingandEOR300CO2tonnesperdayShougangSteelChinaFeasibilitystudyin2015Top-blowingCO2CO2utilizationNotAvailableShougangJingtangChinaCompanypilotBottom-blowingCO2CO2capturingandutilization50,000tonnesCO2peryearShougangSteelChinaProvincialpilotprojectin2022CO2UtilizationCO2capturingandutilization140,000tonnesCO2peryearDelongSteelChinaProvincialpilotprojectin2022SteelSlagUtilizationandCO2EORCO2utilization500,000tonnesCO2peryear(firstphase),totalcapacityat2MtCO2/yearBaotouSteelChinaDemonstrationbeganinJuly2022Sources:(MinistryofScienceandTechnology2021;ShougangGroup2022;K.DongandWang2019;ToshibaInternationalCorpandTongfangEnvironment2015)44Net-ZeroRoadmapforChina’sSteelIndustryCCUSpotentialinChina’ssteelindustryChinahassignificanttheoreticalCO2storagecapacity.Dahowskietal.(2009)estimatedthatChinahasapotentialCO2capacityof2.3trilliontonnesofCO2inonshorebasins,andanother780GtCO2inrelativelycloseoffshorebasins.(Cai,Li,andZhang2022)estimatedChina’sCO2storagecapacityisintherangeof1.21to4.13trilliontonnes.Morethan99%oftheestimatedstoragecapacityisindeepsaline-filledsedimentarybasins,including16onshoreand9offshorebasins,asshowninFigure34.Thelargestthreeonshorestorages,includingSongliaoBasin,TarimBasin,BohaiBayBasin,accountformorethanhalfofthetotalstoragecapacity.Inaddition,SubeiBasinandOrdosBasinalsohavesignificantstoragepotential(Cai,Li,andZhang2022).AmuchsmalleramountofCO2storagecapacityisestimatedindepletedgasfields,depletedoilfields,andcoalseams.Figure34.GeologicalCO2storageformationsinChina(Dahowskietal.2009)China’sironandsteelplantsareoftenlocatedinprovinceswithrichironoreandcoalresources,suchasHebei,Liaoning,Shanxi,andInnerMongolia,andalsolocatedincoastalregionswhichhaveahigherdemandforsteelproducts.Onestudyshowsthatabout79%ofChina’sironandsteelplantsasof2020canfindsuitablegeologicallocations(withina250kmradius)(Cai,Li,andZhang2022).AsshowninFigure35,steelplantslocatednearBohaiBayBasin,JunggarBasin,JianghanBasin,andOrdosBasinhavehigherCO2emissions,arenearfeasiblestoragelocations,andhaveahighermatchwiththestoragesites.Incontrast,steelplantsinthesouthandcoastalareasofChinahaveahighercostofgeologicstorageduetolongtransportationdistancesandrelativelylowerCO2emissions(Cai,Li,andZhang2021).45Net-ZeroRoadmapforChina’sSteelIndustryFigure35.CO2emissionsofChina’sIronandSteelFacilitiesandGeologicalStorageLocations(Basedonthegraphfrom(Cai,Li,andZhang2022))DuetolimitedstoragecapacityinCO2-enhancedoilrecovery(EOR)andcompetitionwithotherindustries(cementandchemicalsectors),thesteelindustrycannotachievedeepmitigationbyonlyrelyingonCO2-EOR,butmustconsiderotherCCUSapproaches.Table11providesasummaryofestimatedCCScostinChinaovertime,includingCO2capture,transportation,andstorage.ItshowsthatCO2capturingrepresentedthemajorityofthecostcomparedtoothercomponentsoftheCCSsystem.ThemedianCO2capturingcostby2025wouldbeabout$36-48USDpertCO2,usingpost-combustioncapturingtechnologies,whicharethemostmaturebutnotscaledcommerciallyintheindustryyet.Table11.EstimatedCCSCostinChina(Cai,Li,andZhang2021)CCSTechnology20252030203520402050UnitCapturingCostPre-combustion16-3014-2011-128-115-8$USD/tPost-combustion36-4829-4325-3416-2812-23$USD/tOxy-combustion47-7425-6020-5017-3614-23$USD/tTransportationCostTruck0.14-0.220.12-0.20.11-0.190.09-0.170.08-0.17$USD/t-kmPipeline0.120.110.090.080.07$USD/t-kmStoragecost7.8-9.36.2-7.85.4-6.24.7-5.43.9-4.7$USD/tCCUSchallengesinChina’ssteelindustryThedevelopmentofCCUSinChina’ssteelindustryfacesseveralchallenges.WhileChinahasabout36CCUSdemonstrationprojectseitherinoperationorunderconstructionasof2021(Cai,Li,andZhang2021),mostoftheCCUSapplicationsareinEOR,enhancedcoal-bedmethanerecovery,andthepowersector.SteelindustryCCUSapplicationsarelimitedinscope(i.e.,focusingonutilization)andscale,asdiscussedearlier.Technically,CCUSprojectsmayrequireadditionalenergytooperatetheCO2capturingandcompressingsystem.TheincreasedenergydemandcanbeatechnicalchallengetointegratetheCCSsystemonsiteaswellasafinancialchallengetoprocureorproducegreenenergy.CCUprocessesthatcanturnCO2emissionsintovaluableproductsoftenrequiregreenhydrogenforchemicalconversion.Securinggreenhydrogen(whetherproducing,transporting,oroutsourcingit)canbedifficultforsomesteelplants.Inaddition,somesteel46Net-ZeroRoadmapforChina’sSteelIndustryplants,especiallytheoneslocatedinSouthernChinaorcentralChina,mayfacelongerCO2transportationneedstofindsuitablegeologicalstoragesites.Financially,bothCCUandCCSprojectscurrentlyhavehighcosts.Withoutaclearmarketsignaloncarbonormitigationefforts,steelcompaniesarereluctanttoinvestinCCUSprojects.SignificantinvestmentandpolicysupportneedtobeprovidedtoacceleratetheresearchanddevelopmentofCCUStechnologies,rangingfrominnovation,testing,validating,pilotingtoscalingup.ClearmarketincentivesneedtobeprovidedandinnovativebusinessmodelsneedtobeencouragedtoreducetherisksandcostsassociatedwithCCUSprojectsinthesteelindustry.ForCO2storage,siteselectionneedstoberobusttominimizeenvironmentalrisks,suchasCO2leakage(Caietal.2017).47Net-ZeroRoadmapforChina’sSteelIndustryDecarbonizationofheavyindustrieslikethesteelindustryisachallengingtaskandcanbecapitalintensive.Toovercomebarriersandavoidthemisallocationofinvestmentsandcapitallock-inintechnologiesthatwillnotmeettheneedsoffutureclimate,regulatory,andmarketenvironments,aclearactionplanisneeded.Thefollowingsectionpresentssuggestedactionsforgovernments,steelmanufacturers,andotherstakeholderstounlockinvestmentsinbreakthroughproductionroutesforlow-carbonsteel.SuggestedactionsfortheChinesegovernmentWhilethepolicymixtosupportthetransitiontowardsnet-zerocarbonemissionsinthesteelindustrymayvaryacrosscountriesandjurisdictions,thetransitionisunlikelytohappenatthespeedrequiredwithoutgovernmentintervention.ThefollowingsubsectionbrieflydiscussesthepossibleactionstheChinesegovernmentcantaketoacceleratethetransitiontowardanet-zerocarbonsteelindustry.Near-Term:•Discourageinstallationofanynewblastfurnaces(BFs)inChina.TherewillbeasubstantialincreaseindomesticsteelscrapavailabilityinChinaeveninthenearterm(by2030)thatcouldreplacetheneedforconstructionofnewBFs.Instead,therewillbeaneedtobuildnewEAFsteelmakingplants.•DiscouragethereliningofBFsasmuchaspossibleandencourageinstallationofH2-DRIorH2-readyDRIplantstoproduceironfromironore.•Improvingenergyefficiency,coupledwithreducingairpollution:Government(NDRCandMEE)candeveloppoliciestopromotenear-terminvestmentinenergyefficiencyandultra-lowemissionsretrofits,suchasincentivesforenergyefficiencyinvestment,requirementsforretrofitreadybuilt,andsunsetclausestostrengthenenergyefficiencyinthesteelindustry(IEA,2022).•Improvingscrapqualityandavailabilitythroughabetterrecyclingsystem:Government(NDRC,MIIT,andMOF)canencourageandsupportthedevelopmentofsteelrecyclingthroughdisseminationofrecyclingtechnology,developingscraprecyclingstandards,andprovidingtaxbenefitsandincentivesforscrapcollectionandsortingtorecyclingfacilities.•Developingahydrogenmetallurgicalactionplan:Thegovernmentbyworkingwiththeironandsteelindustryassociation(CISA)andsteelcompanies,canestablishaclearhydrogenmetallurgicalactionplanforthesteelindustry,includingthedevelopmentofanindustryallianceorcoalitiononhydrogen’sindustrialapplicationstopromotethedevelopmentofhydrogenDRI,incentivesforthesteelindustrytousehydrogen,andensurethesupplyandtransportationofhydrogeninthesteelindustry.•EstablishingCO2orGHGemissionstandards:Government(CNIS)canestablishCO2orGHGemissionstandardsforkeysteelproducts.Emissionstandardscanbesetascarbon(orCO2equivalent)intensitythresholdsperunitofsteelproduct.Suchstandardscanprovidealong-termsignaltoincentivetechnologybreakthroughstodrivedownemissions.•Acceleratingtech-to-marketinlow-carbonsteeltechnologies:Government(NDRC,MIIT,andMOF)canenhancetechnologicaldevelopmentbysubsidizinglow-carbonsteelproduction.7ActionPlanandRecommendations48Net-ZeroRoadmapforChina’sSteelIndustry•ExpandingEmissionsTradingSystem:Government(MEEandCNIS)canexpandthecurrentEmissionsTradingSystem(ETS)toincludetheironandsteelindustry,supportedbytheimplementationofemissionaccounting,reporting,andverificationsystems(IEA,2022).•Buildingcapacityforlow-carbonironandsteelmakingtechnologiesdevelopmentanddeployment.GovernmentshouldworkcloselywiththesteelindustryinChinaandprovidesupportforRD&Dneededtodevelopdomesticlow-carbonironandsteelmakingtechnologiesanddeploythematlargescale.CurrentlyDRIandH2-DRIironmakingtechnologyisdonebyafewinternationalcompanies.Chinaneedstodevelopitsdomesticcapacityneededforalarge-scaledeploymentofthesetechnologiesathome.•Cross-sectorpolicyalignment:Governmentcanconsidercross-sectorpolicylinkagesandimplicationstosupportthesteelindustry’senergytransition.Powersectordecarbonization,hydrogenproductionandsupply,aswellasthedesignanduseofsteelproductswillhaveasignificantimpactonthesteelindustry.Anintegratedpolicyframeworkcanbeachievedbyimplementingsupply-sidepolicyinstrumentslikeGreenPurchaseAgreements(PPA)anddemand-sidetechnologyoptionslikeenergystorageandpower-to-hydrogen,liquidfuels,orchemicalstechnologies(Wynsetal.,2019).Mid-to-LongTerm:•Relocatingintegratedsteelmills:Thecentralgovernment(NDRC,MEE,andMOF)canworkwithlocalgovernmentstoidentifypriorityareasfortherelocationofintegratedmills,andprovideincentivesandfinancingsupporttoattractintegratedsteelmillstoregionswithrichrenewableresources.•Encouraginginterprovincialwastecirculationafter2030:Thecentralgovernment(MEE)canalsoconsiderencouraginginterprovincialwastecirculationbetweeneasternprovincesandwesternprovinces,asscrapavailabilityincreasesincoastalregionsafter2030-2040.•Guidedphaseoutofblastfurnaces:Government(NDRCandMEE)canprovidepolicysupporttoguidethetransitionofintegratedsteelmillsinChina,suchasrequirementsandincentivesonphasingoutblastfurnaces,jobtrainingandreplacementsupport,andincentivestothelocalgovernments.•Creatingamarketforlow-carbonsteel:Thecentralgovernment(NDRCandCNIS),workingwiththeironandsteelindustryassociation(CISA)cancreateamarketforNearZeroemissionsteelusingNearZeromandates,regulationsoncarboncontent,andprogramslikecertificationandproductstewardship(IEA,2022).Programssuchasgreenpublicprocurement(GPP)ofcleaner/low-carbonsteelforgovernment-fundedinfrastructureprojectsshouldbeconsidered.•Increasingawarenessofmaterialefficiency:Government(NDRCandMIIT)canincreasetheawarenessofmaterialefficiencystrategiesbycollaboratingwithsteelconsumers,suchasconstructioncompanies,engineeringfirms,anddesigncompaniestodevelopanddisseminateguidebooksandbestpracticetechnologies.•Incentivizingmaterialefficiency:Government(MOF)canincentivizematerialefficiencythroughtaxsystems,i.e.,increasingtaxesonmaterialextraction,use,ordisposal(CLGEurope,2017),orcreatingmandatorystandardsformaterialefficiencyandrecycledcontent(CLGEurope,2017).49Net-ZeroRoadmapforChina’sSteelIndustry•Providingfinancialsupportoninnovationandrolloutofnewzero-carbontechnologies:Government(NDRC,MOST,andMOF)canprovidefinancialsupportforthebuildingofpilotplantsanddemonstrationoftheimplementationofinnovativedecarbonizationtechnologies.•Piloting,testing,andvalidatingindustry-scaleCCUSprojects:GovernmentcanplayanimportantroleinpilotingandvalidatingCCUStechnologiesintheironandsteelindustrytoshowcasetechnologies,demonstrateperformance,andprovideexamplesforsuccessfulbusinesscases.•Establishingtech-to-marketpartnerships:Governmentcanestablishand/orfacilitatepartnershipsbetweengovernment,industry,researchinstitutes,andacademiatofosterresearchinthefieldoflow-carbonsteelproductiontechnologies,aswellassup-portingstakeholdercollaborationsbetweenfinalmaterialusers,technologysuppliers,andtradeunionstofacilitatetherolloutofthelow-carbontechnologies(IEA,2022).•Stimulateinvestmentinlow-carbontechnologies:Governmentcanstimulateinvest-mentinlow-carbontechnologiesbyprovidingdirectpublicfunding(IEA2022);facil-itatingaccesstopublicandprivatesectorfundsalignedwithinnovationsforenergydecarbonization(CLGEurope,2017);establishingmechanismslikelow-interestloansorblendedfinancestoencourageprivatesectorspendinginbreakthroughproductionroutesforlow-carbonsteel;providingsustainableinvestmentschemesandtaxonomies(IEA,2022).SuggestedactionsforsteelcompaniesThesteelmanufacturingindustrycancomplementgovernmenteffortstoacceleratethedecarbonizationofsteelproduction.Therearevariousstrategiesindustrystakeholders(suppliersandbuyers)canadopttofacilitatethetransitiontowardlow-carbonsteelproduction.NearTerm:•Continuetoimproveenergyefficiency:Steelcompaniescancontinueimprovingenergyefficiency,throughadoptionoftechnologiessuchaswasteheatrecoveryandsmartmanufacturingtechnologies,especiallyinthesintering/pelletizing,steelmaking,andsteelcastingandrollingprocesses.•Implementstandardsonlife-cycleemissionsforsteelproducts:Steelcompaniescanworkwiththeindustryassociation(CISA)andstandardizationagencies(CNIS)totrackanddocumentthelife-cycleemissionsofkeysteelproducts,usingChina’snationaland/orindustrystandards.ThiswillnotonlypreparethesteelcompaniesforfutureexpansionofChina’sETS,butwillalsoprovideexperienceandnecessaryinputstorefineandimproveemissionstandards.•Consideradoptingemissionlabelsforkeysteelproducts:InternationallyrecognizedemissionslabelingsuchasEnvironmentalProductDeclaration(EPDs)canbeconsidered.InMay2022,China’sIronandSteelIndustryEnvironmentalProductDeclaration(EPD)Platformwaslaunched,organizedbyCISAandBaowuSteel.Ontheplatform,severalsteelcompanieshavepublishedtheirproductEPDs,includingBaowuSteel,ShanxiTaiSteel,andMa’anshanSteel.Moresteelcompaniescanconsiderjoin-ingtheplatforminthenearterm.Thisplatformcanalsofacilitatedownstreamcompa-niestounderstandtheenvironmentalimpactsofpurchasedsteelproductsandsup-portpublicandprivategreenprocurement.Also,methaneemissionsfromcoalminingareimportantandshouldbeseriouslyconsideredinScope3emissions.50Net-ZeroRoadmapforChina’sSteelIndustryMid-to-LongTerm:•Establishinganindustryhydrogenmetallurgicalalliance:Anindustryallianceonhydrogenmetallurgycansupporttheresearchanddevelopment(R&D),piloting,testing,andverificationofkeytechnologiestoreducerisks,demonstratetechnologyperformance,andacceleratethetechnologycommercializationprocess.•Adoptingsmartmanufacturinganddigitaltechnologies:Steelcompaniescaninvestandadoptsmartmanufacturinganddigitaltechnologies,suchassensorsandcontrols,toimproveoperationalefficiency,upgradeproductionprocesses,improveproductionyields,andreducematerialandenergylosses.•Investinginproductinnovationandupgrades:Steelcompaniescaninvestindevelopinglow-carbon,high-strengthsteelproductswhichcanlastlongerwithhigherperformanceandimprovematerialefficiencyinend-useapplications.•Developingpilotprojectsoncarboncapture,utilization,andstorage(CCUS):SteelcompaniescanconsiderdevelopingpilotCCUSprojects,especiallyCCU,withinthesteelindustrytoidentifypotentialapplications,testtechnologyperformance,andbetterunderstandscalabilityandcosts.•Initiatingpartnershipsandcollaborativeresearchprojects:Steelcompaniescaninitiatepartnershipswithresearchinstitutes,academia,thinktanks,andotherstakeholderstodevelopbusinesscasesfordecarbonizationtechnologies(CLGEurope,2017),explorethepotentialforcross-cuttingdecarbonizationtechnologiesfornear-termoptions(Hasanbeigietal.,2017),conducttechno-economicanalysesofcurrentlycommerciallyavailableandemergingdecarbonizationtechnologiesbycollaboratingwithresearchinstitutesandacademia,buildpilotplantstodemonstratelow-carbontechnologies,andresearchthemultiplebenefitsofdecarbonizationtechnologies(Hasanbeigietal.,2017).•Trackingandmonitoringemergingtechnologies:Steelcompaniescancloselytrackandmonitornewtechnologydevelopments,suchasironoreelectrolysis,eitherthroughanaqueousprocessormoltenoxideelectrolysis.•ExploringbusinessandtechnologycasesonCCUSwithotherindustries:SteelcompaniescanexplorepotentialbusinessandtechnologyopportunitiesintheareaofCCUS,especiallyworkingwithotherindustries,suchasexploringthesynergiesbetweenthesteelandchemicalindustry,steelindustryandbuildingmaterialsindustry,andothers.SuggestedactionsforsteelconsumersAlargeshareofsteelproducedinChinaisconsumedforconstruction,automotivemanufacturing,andelectricalandopticalequipmentmanufacturing(ADB,2022).Steelcon-sumersfromtheseindustrysectorscanleveragetheirbuyingpowertoinducealow-carbontransitioninthesteelmanufacturingindustry.Thegovernmentistypicallyoneoftheleadingconsumersofironandsteel.Governmentcanleverageitsbuyingpowertosupportthetransitionofsteelmanufacturingtowardslow-carbonsteelbyimplementinggreenprocurementpolicies(GPP)(Hasanbeigietal.2021,2022).Near-Term:•Governmentcansetcleartargets,criteria,andtimeframesforreducingembeddedcarboninthesteelprocuredfortheinfrastructureprojectsfollowedbyanopenorrestrictedtenderingprocessidentifyingthesuppliers.51Net-ZeroRoadmapforChina’sSteelIndustry•GovernmentcanmandatethesubmissionsofEnvironmentalProductDeclarations(EPDs)toenterthetenderingprocessforinfrastructureprojects.Mid-to-LongTerm:•Governmentcanencouragethepublicationofinformationonthelife-cycle-costingofsteel.•Theprogresstowardsachievingtargetscanbeassuredbysettingmonitoringandreviewingmechanisms.Companiesthatbelongtotheconstruction,automotive,andelectronicsandelectricalequipmentmanufacturingsectorsintheChineseindustrysectorcansignificantlycontributetothelow-carbonsteeltransitionbyfosteringthemarketforlow-carbonsteelproducts.Companiescanadoptgreenprocurementpoliciesandsetdemandsignalstoinducethetransitiontowardslow-carbonsteelmanufacturing.Near-Term:•Companiescansetvoluntaryemissionsreductiontargets(industrytargets,projecttargets,orproducttargets)toencourageindustrywidecarbonemissionsmonitoring.•SteelconsumerscantrackembodiedcarbondataandencouragecompliancefromthesupplierusingtoolslikeEPDs.•Directdemandsignal–Anagreementcanbesignedbetweenasteelsupplierandbuyerwhichprovidescertaintyneededforthesuppliertoinvestinabreakthroughproductionroutetoproducelow-carbonsteel.Mid-to-LongTerm:•Steelconsumerscandesignfinancialornon-financialincentiveprogramstoencouragelow-carbonsteelproduction.•Futurepurchasecommitmentbybuyers–Althoughthissignaldoesnotguaranteeapurchasefromaparticularsupplier,itindicatesthewillingnessofthesteelbuyerstoinvestinlow-carbonsteel,thus,encouragingthesupplierstoproducelow-carbonsteel.Thesecommitmentsshould,however,bemadepublicandideallyaggregatedwiththecommitmentsfromproducers.•Indirectdemandsignalsareindirectcommitmentstoreducecarbonemissionssentbyabroaderpooloforganizationssuchasinvestors,funds,orend-usemarkets(ETC2021).SuggestedactionsforotherstakeholdersThelow-carbontransitionofsteelmanufacturingcanalsobesupportedbyotherstakeholdersliketechnology/equipmentsuppliersandpublicutilities.NearTerm:•Technologymanufacturerscancollaboratewithgovernmententitiestodisseminatetechno-economicinformationtosteelmanufacturers•Technologysupplierscancollaboratewithacademia,thinktanks,andsteelmanufacturerstodevelopenergy-efficientandlow-carbontechnologiesforsteelpro-duction.Mid-to-LongTerm:•Technologymanufacturerscandeveloppilotplantsforthedemonstrationofinnovativelow-carbontechnologiesanddisseminatetheresults.52Net-ZeroRoadmapforChina’sSteelIndustryInconclusion,ouranalysisshowsthatChina’sironandsteelindustrycansignificantlyreduceitsCO2emissionsbymid-century,reducing96%by2050comparedtothe2020level,undertheNet-ZeroEmissionsScenario.Thisscenarioistechnologicallyachievablewithmostlycommercializedtechnologiessuchasscrap-basedEAFandDRI-EAFproduction,andnear-commercializationtechnologiessuchasgreenH2-DRI.OurresultsshowthatswitchingfromBF-BOFproductiontoscrap-EAFproductionroutewouldhavethelargestcontributiontoCO2reduction,followedbydemandreductionandfuelswitching,electrificationofheating,andelectricitygriddecarbonization.AchievingtheresultsshownintheNet-ZeroEmissionsscenariorequiresunprecedenteduptakeoflow-carbontechnologies,rangingfromaggressiveenergyefficiencyimprovementstolarge-scaleadoptionofcommercializedtechnologies,switchingtosecondarysteelmanufacturing,andsignificantlyincreasetheuseoflower-carbonfuelinChina’sironandsteelindustry.Inthenearterm,werecommendthattheChinesegovernmentcontinuetostrengthenenergyefficiencythroughbenchmarking,retrofits,andincentives;whileimprovingsteelproducts’recyclingsystemtoincreasescrapqualityandavailability.TheChinesegovernmentshouldbeaheadofthecompaniesbyprovidingstandardsandpolicyguidance,intermsofcarbonemissionstandardsforsteelproductsandhydrogenapplicationsinmetallurgy.Steelcompanies,whilecontinuepursuingenergyefficiency,needtoconsiderimplementinglife-cycleemissionstandardsaswellasemissionlabelsfortheirsteelproducts.Inthemid-term,thegovernmentshouldplanandguidetheindustryadjustments,especiallyintermsofphasingoutblastfurnacesandrelocatingsteelmillstomatchlocalrenewableresources.TheChinesegovernmentcanalsoleveragemarketforcesandsetupgreenpublicprocurement(GPP)programsforsteeltoincentivizelow-carbonsteelproduction.Steelcompaniesinthemid-termwillfaceevenhigherpressureandcompetitiontoadoptlow-carbontechnologies.Werecommendsteelcompaniesjoinanindustrygrouporapublic-privatepartnershiptohaveaccesstothelatestdevelopmentintechnologies(H2DRI,CCUS,smartmanufacturing,etc.)andpolicies.Werecommendsteelcompaniesdeveloppilotsanddemonstrationprogramstouse,test,andfurtherimprovelow-carbonironandsteelmakingtechnologies.WesuggestthattheChinesegovernmentprovidefinancial,regulatory,andpolicysupportontechnologyinnovation,intheareasofinvestinginhigh-riskandhigh-returnbreakthroughtechnologies,developingtech-to-marketprograms,andencouragingtechnologypilots,tests,andvalidation.53Net-ZeroRoadmapforChina’sSteelIndustryAbuDhabiNationalOilCompany(ADNOC).2017.“ADNOCandMasdar’sCarbonCaptureFacilityHoldsKeytoLimitingIndustrialCO2Emissions.”2017.https://www.adnoc.ae:443/en/news-and-media/press-releases/2017/adnoc-and-masdars-carbon-capture-facili-ty-holds-key-to-limiting-industrial-co2-emissions.AbdulQ.,ShamsuddinA.,DawalS.Z.,NukmanY.“Presentneeds,recentprogressandfuturetrendsofenergy-efficientUltra-LowCarbonDioxide(CO2)Steelmaking(ULCOS)program”.RenewableandSustainableEnergyReviews.,2016.ArcelorMittal,2022.Low-carbonemissionssteelstandards.ArcelorMittal.2021.“ArcelorMittalExpandsPartnershipwithCarbonCaptureandRe-UseSpecialistLanzaTechthroughUS$30MillionInvestment.”December9,2021.https://cor-porate.arcelormittal.com/media/press-releases/arcelormittal-expands-partnership-with-car-bon-capture-and-re-use-specialist-lanzatech-through-us-30-million-investment/.Argus.2021.“ChinaHydrogenAllianceSeeks100GWRenewableCapacity.”2021.https://bit.ly/3mYhOfh.AsianDevelopmentBank(ADB),2022.People’sRepublicofChina:Input-OutputEconomicIndicators.https://data.adb.org/dataset/peoples-republic-china-input-output-economic-indi-catorsBai,Yujie.2022.“FirstNationalHydrogenDevelopmentPlanAnnounced.”Caixin.2022.https://www.caixin.com/2022-03-23/101859866.html.Bataille,C,SetonStiebert,andFrancisG.N.Li.2021.“GlobalFacilityLevelNet-ZeroSteelPathways.”TheInstituteforSustainableDevelopmentandInternationalRelations.http://netzerosteel.org/wp-content/uploads/pdf/net_zero_steel_report.pdf.Cai,Bofeng,QiLi,andXianZhang.2021.“ChinaCarbonDioxideCapture,Utilization,andStorage(CCUS)AnnualReport(2021).”Cai,Bofeng,QiLi,GuizhenLiu,LancuiLiu,TaotaoJin,andHuiShi.2017.“EnvironmentalConcern-BasedSiteScreeningofCarbonDioxideGeologicalStoragei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