China needs to transition its steel sector from a carbon-intensive process to electric steelmaking if it is to reach its goal of becoming carbon neutral by 2060 , according to a new report by US think tank Global Energy Monitor. Reducing the carbon dioxide emissions of steel plants will be critical to achieving Beijing’s climate targets since the sector is so vast, with China accounting for more than half of the world’s steelmaking capacity, the report released on Tuesday said. It said the country’s steelmakers produce over 60 per cent of the global steel industry’s emissions, and the sector accounts for 15 per cent of China’s carbon dioxide emissions. That makes it the second-largest emitter in the country after the power sector, which produces about 40 per cent of total emissions. How US-China competition in addressing climate change could benefit Southeast Asia But the group said steelmakers could take action to reduce emissions by moving to a less carbon-intensive process. More than 75 per cent of plants in operation use a high-carbon process called blast furnace-basic oxygen furnace, or BF-BOF. It said 93 per cent of the steelmaking capacity being built in China will use this process – compared to 75 per cent under construction worldwide. “To decarbonise the steel sector, China needs to transition away from BF-BOF steelmaking to the electric arc furnace (EAF) steelmaking,” said Caitlin Swalec, lead author of the report. “Building new BF-BOF steel plants brings large stranded asset risk to the country, especially with the complications of overcapacity, so any new capacity in China should be lower-emissions processes like scrap-based EAFs,” she said. The report was based on the first comprehensive survey of all crude steel plants around the world with a capacity of at least 1 million tonnes per annum. It looked at 553 steel plants representing 82 per cent of the world’s installed capacity, as well as 42 proposed new facilities. The group found that more than 60 per cent of global steelmaking capacity uses the high-carbon BF-BOF process. In addition, it estimated that if the steel industry continued to build new blast furnaces using coal it could be saddled with US$70 billion in stranded assets that need to be written off, since the technology will become obsolete as carbon emissions are cut worldwide. China turns on world’s first giant hydropower turbines The report said all existing blast furnaces that use coal should be outfitted with the best available technology or retired, and that new low-emissions steelmaking technologies needed to be developed, scaled up and deployed. “Building new coal blast furnaces is a bad bet for steel producers and a bad bet for the planet,” said Christine Shearer, head of the Global Energy Monitor’s coal programme. Chinese President Xi Jinping announced in September that China aimed to reach net-zero emissions before 2060 and peak carbon emissions before 2030. The pledge has put the country’s steel mills under pressure to speed up the process of decarbonisation and hit peak emissions earlier. Beijing is now apparently carving out a plan for the steel industry to reach peak emissions within four years and to reduce them by 30 per cent by 2030, state-run Economic Information Daily reported in March. Li Xinchuang, president and chief engineer at the China Metallurgical Industry Planning and Research Institute, told the newspaper that China’s steel sector “faces a big challenge in the low-carbon transi tion” and that the cost of reducing emissions was high. Chinese steel production powers ahead despite curbs in industry’s heartland The industry regulator in April said steel capacity and output would be reduced this year to achieve peak emissions sooner. That was after crude steel output increased by 5.2 per cent last year to a record 1.05 billion tonnes in response to a fast recovery in construction and manufacturing demand following a slump caused by the Covid-19 pandemic. Swalec from Global Energy Monitor said China “should strictly enforce capacity production limits, with clampdowns primarily on the higher emissions BF-BOF plants”. “It could also use their capacity-shifting policies to incorporate emissions reduction strategies like requiring that capacity be shifted from BF-BOF processes to EAF-based processes,” she said.