This fall, the world’s biggest steel company ArcelorMittal announced a goal to reach carbon neutrality, a historic move that signals a sea change for heavy industry companies around the world.
Arcelor, and its peer industrial companies - which produce not just steel but cement, paper, and chemicals - are responsible for a staggering 40 percent of global emissions when the full scope is considered. Given this outsized impact, heavy industrial firms like ArcelorMittal have come under fire from environmental groups like Mighty Earth for failing to put forward climate pollution reduction plans in the middle of a global climate crisis. ArcelorMittal’s announcement indicates that the steel sector is beginning to realign its priorities in response to this pressure, and, crucially, comes at a ripe moment as governments around the world are undertaking dramatic Covid-19 recovery efforts that could double down on solutions to the climate crisis or, should heavy industry and governments fail to grasp this opportunity - lock in the path to climate disaster.
In addition to corporate action, public investment in collaborative, public-private solutions will be needed to transition heavy industrial companies like Arcelor to a zero-emission pathway, facilitate the emergence of breakthrough technologies, and drive near-term material and energy efficiency. But the private sector must not wait and should take aggressive steps to make progress on decarbonization now.
A 2050 goal isn’t enough; ArcelorMittal must set ambitious 2030 and 2025 reduction targets and accelerate the industry’s pathway away from coal and toward clean technology.
We took a comprehensive look at ArcelorMittal’s announcement and identified some of the steps the company and the rest of the industry must take. We hope to see the following in the company’s forthcoming strategic plan to achieve carbon neutrality, which they have promised to deliver by the end of 2020:
- One, three, five, and 10-year science-based targets rooted in the remaining carbon budget for the planet calibrated to 1.5 C degree trajectory for the entire steel industry; including their full company & investment footprint from China to India, and assets they still have an investment in within the United States.
- A just and equitable transition for their workforce to shift toward low and zero carbon jobs,
- Acknowledgement and amends for communities directly harmed by localized industrial pollution from current or past operations, whether in Chicago or South Africa,
- A near and midterm plan to address the company’s outsized legacy and impact on global climate emissions through restoration and conservation of carbon and biodiverse rich ecosystems,
- Aggressive advocacy focused on policymakers, in partnership with climate advocates, to prioritize public funding for breakthrough technologies, sunset policies, phase outs for the use of coal in steel making, and unprecedented global trade cooperation between the top steel producing nations, and
- Public policy support for a green recovery that ties corporate climate emissions reductions to economic recovery funds in the wake of the Covid-19 pandemic and helps lock out future climate pollution from our global economic recovery.
Arcelor’s climate plans, of course, must be transparent so the public can assess whether the company is sufficiently addressing climate pollution. It must also take a global approach, so that emissions from steel production are not simply being shifted from one jurisdiction to another. We also expect Arcelor CEO Lakshmi Mittal to offer specific plans that encompass the company’s subsidiaries and partner projects.
ArcelorMittal’s Extended Footprint
ArcelorMittal recently acquired Essar Steel in India in partnership with co-owner Nippon Steel of Japan. Nippon has also promised to produce a plan for net zero emissions this year. In September 2020, ArcelorMittal announced a billion-dollar sale of ArcelorMittal USA operations to Cleveland Cliffs, a burgeoning US steel industry player. But ArcelorMittal has retained a large number of shares in that company, and it should be included in ArcelorMittal’s plans to meet its climate commitments. ArcelorMittal should extend similar consideration to its investments, subsidiaries, and joint ventures like Aperam as well.
Heavy industry is a tough nut to crack when it comes to climate, but it’s a surmountable challenge. It’s also one that must be addressed with fierce urgency by business and political leaders alike – because we are out of time.
If left untamed, heavy industrial emissions will make up the bulk of emissions by 2030.
And within the broader industry, the iron and steel sector has an outsized carbon footprint – producing around 7 percent of global emissions. To put it into perspective, this amount of CO2 surpasses all vehicles and airplanes combined. As a multinational steel and mining giant, ArcelorMittal is likewise a global behemoth of carbon emissions. Producing 97.31 tons, or 5.2 percent, of all steel, the company single-handedly accounts for almost 1 percent of global carbon emissions.
As the backbone of our modern infrastructure – building our cars, securing our buildings, paving our roads – heavy industrial sectors like steel and cement are not going away anytime soon, but the answer to our economic challenges cannot be unbridled emissions from new steel and cement. Material efficiency and dramatic supply chain innovation across heavy industry and manufacturing are essential to preventing our much-needed economic recovery from blowing the remaining global carbon budget.
Clean Steel for Cars: A Climate Need
Due to its size, ArcelorMittal has outsized influence in the markets they sell to. For instance, the company has an estimated 18 percent of the worldwide market share of the automotive industry. Ford recently announced that ArcelorMittal will be the sole supplier of steel for its 2021 Ford Bronco. ArcelorMittal’s actions will therefore lead the way not just for other steel manufacturers, but also for steel customers up and down the supply chain as they think through their own commitments and sourcing standards. Even Tesla, an automotive company known for their electric vehicles that can operate on renewable electricity, has links to ArcelorMittal. A translated quote reads,
“The steel of one in two cars that circulate in Europe and 70% of Tesla leaves [ArcelorMittal's] blast furnaces.”
ArcelorMittal’s actions will therefore lead the way not just for other steel manufacturers, but also for steel customers up and down the supply chain as they think through their own commitments and sourcing standards.
This combination of factors makes the details of the company’s pathway to carbon neutrality all the more critical – and ArcelorMittal’s record is far from squeaky clean.
Dirty Coal, Dirty Steel
One of the biggest sources of ArcelorMittal’s outsized carbon footprint is the company’s strategy of buying retired, coal-burning blast furnaces. These facilities are the dirtiest possible way to produce steel, in contrast to cleaner technologies like electric arc furnaces that can source renewable energy. Since the 2000s, ArcelorMittal has a track record of buying old blast furnace facilities everywhere from Italy to South Africa, suggesting a very coal-dependent business model that may take years to phase out.
These retired furnaces put not just the climate, but human lives at risk. Among both its workers and the communities near its operation sites, ArcelorMittal has a well-earned a reputation for damaging the environment and human health. In June 2020, ArcelorMittal South Africa paid fines for criminal charges for three breaches of its atmospheric emissions license, following a deluge of resident complaints over terrible smoke, toxic air pollution, and asthma attacks. ArcelorMittal has also bulldozed over graves and has been sued multiple times for toxic spills in waterways.
Coal lies at the heart of ArcelorMittal’s current steelmaking strategy. But this must change.
The phasing out of coal will be the number-one indicator of success. For a company like ArcelorMittal that has such a high proportion of blast furnaces, this process will require bold, innovative, collaborative work, that touches all realms of sourcing, production and transport. Achieving a 1.5C scenario may require restructuring the business model. But this dramatic transition is necessary to achieve the decarbonization the company has promised and which the climate so desperately needs, and we expect to see it fully detailed in their implementation plan.