- A high-resolution, site-level model simulates how European steel and basic-chemicals plants decarbonise via discrete reinvestment choices driven by plant age, location, energy prices, and policy constraints.
- In European primary steel, allowing blast-furnace (BF) reinvestment keeps coal in the mix longer, while banning BF reinvestment accelerates a shift to DRI and phases out coal by ~2040 but requires earlier, higher capex.
- Rising CO1 pricing (about 80/t in 2022 to 00/t by 2050) and timely hydrogen infrastructure deployment are pivotal for making hydrogen-DRI cost-competitive around 204043.
- The transition implies 080B+ in steel investment through 2050, major power/hydrogen build-out needs, and heightened stranded-asset risk for BF-heavy regions if policy or infrastructure lags.
Read More
The paper “Modelling the transformation of energy-intensive industries based on site-specific investment decisions” constructs a high‐spatial‐resolution, bottom-up model using European industry site data to simulate when and how individual production units (plants) will reinvest in decarbonisation technologies, constrained by plant age, spatial infrastructure, policy levers, and energy prices. This fills critical gaps in existing industry decarbonisation models, which often operate at national or sectoral levels without capturing the heterogeneity of investment timing and site specificities.
Key findings from the European primary steel case study: without banning BF reinvestment (CASE 1), coal remains dominant until roughly 2028–2030, with DRI via natural gas first, then hydrogen; by 2050 hydrogen‐DRI dominates where infrastructure allows. Cumulative investments required are ~€71 billion through 2050, with ~€52 billion by 2040.
Under an enforced ban on new BF investments (CASE 2), more rapid early investment (~€30 billion by 2030) shifts towards DRI, leading to earlier elimination of coal use (almost gone by 2040). However, this scenario requires more hydrogen supply infrastructure in early horizon and larger subsidies or policy interventions to bridge cost gaps.
External sources corroborate the heat of the challenge and urgency: Europe’s steel sector emits ~200 MtCO₂ per year and over 50% of production is via BF‐BOF; emission intensity differences are stark (e.g. ~2.3 tCO₂/t for BF‐BOF vs ~1.4 for DRI‐EAF vs ~0.7 for scrap‐EAF)., Many low‐carbon projects are planned but progress is financially and technically constrained by hydrogen supply, scrap scarcity, and energy price volatility.,
Strategic implications:
- Industries and investors need to monitor the age profile of plants; BF plants with older vintages are high risk of being stranded if policies force early bans.
- Policymakers must align CO₂ pricing, other fiscal instruments, funding, and infrastructure deployment—principally hydrogen pipelines, renewable power—to enable competitive DRI options.
- Regions lacking hydrogen infrastructure or favorable energy carrier prices may lag and incur higher transition costs or miss decarbonisation targets.
- Capital mobilisation (~€50-80B for steel alone in Europe) is huge; financing mechanisms will need to address risk and long payback horizons.
Open questions remain:
- How reliable are the assumptions around hydrogen production costs, scrubbed gas availability, carbon price trajectories, and energy carrier‐price convergence?
- What are the supply constraints for scrap steel and renewable electricity needed to power hydrogen electrolysis or DRI‐EAF routes?
- How will global competition and carbon leakage considerations influence Europe’s ability to impose process bans or heavy CO₂ pricing without hurting competitiveness?
- What role will CCUS, materials innovation, or alternative fuels (biomass, synthetic carbon feedstocks) play in complementing DRI/hydrogen/DRI‐EAF strategies?
Supporting Notes
- Europe has 58 blast furnaces at 28 sites (EU27 + 3) producing ~107 Mt pig iron/year and emitting ~152 Mt CO₂ per year; BF refurbishments last occurred between 1971-2016.
- With carbon pricing rising from ~€80/t in 2022 to €300/t by 2050, coal becomes the most expensive energy carrier by 2050, while hydrogen becomes cost-competitive with coal around 2040–2043 under favorable infrastructure and policy conditions.
- In CASE 1 (no ban), investment through 2030 is ~€17B (with ~€9B for blast furnaces), rising to ~€71B through 2050; in CASE 2 (with BF ban), investments are ~€30B by 2030, ~€77B by 2050.
- CASE 2 leads to coal being nearly phased out by 2040; CASE 1 shows linear decline from 2028 onwards, with hydrogen‐fuelled DRI dominating by 2050.
- Globally, BF-BOF emissions reach ~2.33 t CO₂ per tonne of crude steel; DRI-EAF ~1.37 t; scrap-EAF ~0.66-0.70 t. In Europe ~55–57% of steel is produced via BF-BOF., Emission intensity in Poland is notably ~1.8-2.0 t/t depending on mix.
- ‘Green steel’ and low CO₂ premium markets are growing, but supply constraints—scrap steel supply, green hydrogen availability, energy costs—are cited as key bottlenecks.,