Managing carbon-intensive materials in a decarbonizing world without a global price on carbon

Emissions from the production of iron and steel could constitute a significant share of a 2°C global emissions budget (around 19% under the IEA 2DS scenario). They need to be reduced, and this could be difficult under nationally based climate policy approaches. We compare a new set of nationally based modelling (the Deep Decarbonization Pathways Project) with best practice and technical limit benchmarks for iron and steel and cement emissions. We find that 2050 emissions from iron and steel and cement production represent an average 0.28 tCO₂ per capita in nationally based modelling results, very close to the technical limit benchmark of 0.21 tCO₂ per capita, and over 2.5 times lower than the best practice benchmark of 0.72 tCO₂ per capita. This suggests that national projections may be overly optimistic about achievable emissions reductions in the absence of global carbon pricing and an international research and development effort to develop low emissions technologies for emissions-intensive products. We also find that equal per capita emissions targets, often the basis of proposals for how global emissions budgets should be allocated, would be inadequate without global emissions trading. These results show that a nationally based global climate policy framework, as has been confirmed in the Paris Agreement, could lead to risks of overshooting global emissions targets for some countries and carbon leakage. Tailored approaches such as border taxes, sectoral emissions trading or carbon taxes, and consumption-based carbon pricing can help, but each faces difficulties. Ultimately, global efforts are needed to improve technology and material efficiency in emissions-intensive commodities manufacturing and use. Those efforts could be supported by technology standards and a globally coordinated R&D effort, and strengthened by the adoption of global emissions budgets for emissions-intensive traded goods.

Policy relevance

This article presents new empirical findings on global iron and steel and cement production in a low-carbon world economy, demonstrates the risks associated with a nationally based global climate policy framework as has been confirmed in the Paris Agreement, and analyses policy options to deal with those risks.