The EU should set low-carbon steel requirements in automotive production, helping decarbonise two industries at once, campaign group Transport & Environment suggested on Wednesday.

Citing a new study by UK consultancy Ricardo, T&E says green steel could reduce the carbon footprint of car manufacturing in Europe by 6.9 million tonnes in 2030. This is the equivalent of removing 3.5m internal combustion cars from roads annually, Kallanish understands.

A vehicle’s production emissions are expected to account for around 60% of an electric car’s total lifecycle emissions by 2030, with 16-27% of that coming from steel. As scrutiny increases on the climate impact of EV and steel production, decarbonisation efforts need to be accelerated on all fronts.

T&E says this can be done at a “negligible cost” for automakers. It estimates that using 40% green steel in EV production would add just €57 ($62) to a BEV sticker price in 2030. Relying 100% on green steel by 2040 would cost only €8 – compared to using conventional steel – due to CO2 pricing and falling costs of green steel production.

“For less than a tyre change, Europe can build a green steel industry,” says Alex Keynes, cars policy manager at T&E. “The extra cost will be negligible and in time it will be cheaper than conventional steel. But we first need lawmakers to kick start the shift to low-carbon steel in the automotive industry.”

To help steelmakers allocate hefty investments into low-carbon steelmaking, “carmakers should be given an average target that can be met across all their new cars, allowing them to absorb the initial cost via premium models,” T&E says.

The group says this target can be introduced via the EU End-of-life Vehicles (ELV) regulation, which is currently being revised by lawmakers. It recommends a target of at least 40% of green steel content by 2030, rising to 75% in 2035 and 100% in 2040.

With such a policy, steelmakers would have the certainty that customers would pay the premium on low-carbon products.  

The study says the automotive sector, which currently accounts for 17% of the EU’s steel demand, should be a lead market for green steel. Based on announced projects, Europe could produce 172m t of green steel by 2030, with the automotive sector consuming 21m t of it (assuming a shift to lightweighting and less steel use in the sector).

CO2 prices and lower renewable energy costs should make green steel more competitive in future years. However, regulation will be key to getting those projects across the final investment decision line. “Subsidies alone are not enough,” T&E warns.

Green steel should be defined as having a climate impact of between 50kg and 400kg of CO2 equivalent per tonne of steel produced, T&E says. This compares with between 1,800-2,250kg CO2eq/t typically associated with producing conventional steel.