Steel has a dirty climate problem – it’s called coal, and it could bring on a legal headache

We might not always realise it, but steel is present in nearly everything we do. In fact, the sector is one of the biggest industrial emitters, thanks to its reliance on coal-based production. With its progress to decarbonise way off track, our Legal Manager Kirsty Mitchell asks, will steel be the next industry to be targeted by climate litigation?

Whether for cars and ships, bridges and buildings, or even the device you’re reading this on, steel is an essential material of the modern world. Even if something isn’t made of steel, it’s probably been made by a machine made of steel. This might explain why, from all the metals we mined in 2021 (2.8 billion tonnes), 2.6 billion was iron ore, from which we make steel.

But it has a climate problem.

As ubiquitous and useful a material as it may be, the iron and steel sector is one of the biggest industrial emitters – responsible for around 8% of global greenhouse gas emissions. The key driver? Polluting, coal-based production. Traditional methods of producing primary steel through a blast furnace use coal (and lots of it) to remove oxygen from the rusty iron ore. This may generate stronger steel, but it also produces hefty emissions as an end-result.

Ironmaking in the blast furnace is at the heart of steel sector emissions. Source: SteelWatch Explainer Series, Steel and Climate

Progress to decarbonise steel is way off track

The steel industry is – for now – a fossil fuel demand industry. It must lose this dependence if we are to secure a future and climate-proof industrial transformation. But progress to decarbonise steel is slow, and according to the International Energy Agency (IEA), the steel sector is not on track to meet net zero by 2050.

The status quo isn’t helped by steel majors like ArcelorMittal backtracking on green commitments in Europe (as we pointed out in December in this letter to the Financial Times). Concrete plans must be adopted and implemented to eliminate coal from production and invest in renewables-based steel technologies.

And now is the time for bold action: reports indicate that around 70% of existing coal-fired blast furnaces will reach the end of their operational lifetime before 2030. This presents an opportunity for steelmakers to adopt (and investors to invest in) alternative fossil-free steelmaking technologies.

Fortunately, these technological solutions already exist, and are being deployed by first movers in the industry. A good example is the commercial-scale, green steel plant being developed in Sweden by Stegra. It is using renewable hydrogen-based direct reduction of iron technology, and is expected to be operational in 2026. The other key pathway to produce secondary ‘green’ steel without coal is by recycling it in electric arc furnaces, powered by renewable electricity.

Could legal interventions help speed up steel’s transition?

While bold industry leadership, supportive policy frameworks, and green investment are crucial for driving the steel sector’s transition, the legal sphere can also play a significant role in shaping its trajectory.

Climate litigation is increasingly recognised as a powerful tool for change. Individuals and NGOs are turning to the courts to seek accountability for climate impacts, and research from The Grantham Research Institute’s 2024 snapshot of global trends in climate litigation noted how companies from many sectors are now susceptible to being taken to court over climate concerns.

Not only are corporates being challenged for greenwashing, climate-related harms, and mismanagement of climate risk, but those failing to decarbonise at the pace required to align with the Paris Agreement’s 1.5°C temperature goal are also at risk. If inaction persists, heavy industry – a key fossil fuel demand sector – may be exposed to similar challenges, in particular as public awareness of its climate impact increases.

And the steel industry will need to take action, one way or another. The European regulatory landscape on corporate climate accountability is becoming increasingly stringent. In particular, and by no means an exhaustive list, steelmakers should be geared up for:

• More expectations on corporate due diligence: Building on existing soft law responsibilities, the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) is set to transform the corporate responsibility landscape across global industries like steel. Once transposed, the CSDDD will require certain large companies (both within and outside of the EU) to identify and address adverse human rights and environmental impacts within their own operations and supply chains.

• Disclosure (and exposure): Interacting closely with the CSDDD, the Corporate Sustainability Reporting Directive (CSRD) obliges certain large companies to undertake enhanced sustainability reporting in line with detailed standards. As more data enters the public domain for scrutiny, this may give rise to new legal challenges.

• Transition planning requirements – at corporate and site level: The CSDDD will also require certain companies to put into effect a transition plan for climate change mitigation to ensure that the company’s business model and strategy are compatible with the 1.5°C limit. At site level, the revised Industrial Emissions Directive will require in-scope operators to have a public transformation plan setting out how an installation will contribute to a climate-neutral economy by 2050. A compensation right for people whose health has been affected by a breach of the directive will also be introduced – presenting another potential future avenue for challenges.

Steel must strengthen its climate resolve

While different means will help us get there, deep transformation of the steel sector is a critical priority in the coming decade if we are to limit the effects of climate change and maintain a liveable planet. The law can be an effective tool for driving this change and holding relevant actors accountable for their impacts.

High-emitting steelmakers – or indeed any large industrial polluter – should be aware of the risks of climate litigation. Better yet, they can take steps to avoid it, by taking scientifically robust, just, and ambitious measures to accelerate the transition away from coal, and towards green production.