Steel supports our everyday lives – from buildings and cars to bridges and washing machines to electric vehicles and wind turbines. It’s a component of economic growth in emerging economies and contributes to the transition to a lower-carbon future. While valuable, high greenhouse gas emissions from its production have led investors to advocate for the industry to adopt science-based emissions reduction targets.
The energy-intensive process of making steel currently accounts for between six and seven percent of total greenhouse gas emissions. Steel is made by two methods:
- The most common, accounting for around 70 percent of global production, uses an oxygen furnace fueled by metallurgical coal, resulting in high emissions of carbon dioxide.
- The electronic arc furnace (EAF) uses electricity to recycle steel. Although the EAF method is about 36 percent less emission-intensive than the basic oxygen furnace (and could be even less if the electricity used is from a no- or low-carbon source), it requires a steady supply of scrap steel, and converting to EAF steel production requires significant capital investment.
Emissions from this critical industry must be addressed to keep global temperatures within safe limits and meet or exceed the goals of the Paris Climate Agreement. Several years ago, Mercy Investment Services began asking U.S. Steel to disclose its emissions and consider adopting a science-based target to reduce their emissions. Productive discussions have resulted in more public disclosure of the company’s emissions and its efforts to increase energy efficiency. In 2018, U.S. Steel agreed to set a target for reducing its emissions by the end of 2019 and to consider setting a long-term, science-based target.
During a recent meeting with U.S. Steel and several other U.S.-based steel companies, Mercy and other investors discussed investor expectations about climate risk. The daylong roundtable, convened by the Interfaith Center on Corporate Responsibility and Ceres, included presentations from the Science Based Targets Initiative and the Department of Energy on how the companies could work toward setting science-based emissions goals and adopt more energy-efficiency targets and practices throughout their operations as well as productive discussions about current gaps in technology and other challenges faced by the industry. Mercy Investment Services will continue to monitor the progress of U.S. Steel and other companies on reducing greenhouse gas emissions.