Some automakers, including Volvo, which will buy from Stegra and rival SSAB, are marketing cars made from eco-friendly steel as “fossil-free.” And because cars and trucks contain many parts that are much more expensive than the steel they use, even if automakers use slightly more expensive steel, the cost of the vehicles will only increase slightly. Probably a few hundred dollars or less. Some guesses. Many companies have also set internal goals to reduce emissions, and purchasing green steel can help them get closer to those goals.
Stegra’s business model is made possible in part by the unique economic situation within the European Union. In December 2022, the European Parliament approved tariffs on imported carbon-intensive products such as steel, known as the Carbon Border Adjustment Mechanism (CBAM). Starting in 2024, the law will require importers of iron, steel and other goods to report the carbon emissions associated with those materials.
From 2026, companies will have to pay a fee proportional to the carbon footprint of their materials. Some companies are already betting that will be enough to make Stegra’s 30% premium worthwhile.
step up
The law could encourage decarbonization within the EU and for steel importers into Europe, but green steel manufacturers will also need subsidies to cover scale-up costs, said Charlotte Unger, a researcher at the Potsdam Institute for Sustainability in Germany. says: Stegra will receive €265 million from the European Commission to help build the plant. It also received €250 million in funding from the European Union’s Innovation Fund.
Meanwhile, Stegra is working to cut costs and strengthen profits. Chief digital officer Olof Hernell said the company had been investing heavily in digital products to increase efficiency. For example, semi-autonomous systems are used to increase or decrease electricity usage in response to fluctuating grid prices.
Stegra realized that the company did not have sophisticated software to track the emissions it produced at every step of the steel manufacturing process. So it’s building its own carbon accounting software, which will soon be sold as part of a new spin-off company. This type of accounting is very important to Stegra, Hernell says. “Because we demand a pretty significant premium, and that premium is only maintained within the promise of a low carbon footprint.”
