Some of these carmakers – including Volvo, which will buy from Steger and rival SSAB – market cars made from green steel as “fossil-free”. And because cars and trucks also have many parts that are much more expensive than the steel they use, steel that costs automakers a bit more adds little to the cost of the vehicle — maybe a few hundred dollars or less, according to some estimates. Many companies have also set internal targets to reduce emissions, and purchasing green steel can bring them closer to those targets.
Stegra’s business model is partly enabled by the unique economic conditions within the European Union. In December 2022, the European Parliament approved a tariff on imported carbon-intensive products such as steel, known as the Carbon Border Adjustment Mechanism (CBAM). Starting in 2024, the law requires those importing iron, steel and other commodities to report the carbon emissions associated with the materials.
Starting in 2026, companies will have to start paying fees designed to be proportional to the materials’ carbon footprint. Some companies are already betting that this will be enough to make Stegra’s 30% premium pay off.
STEGRA
Although the law could spur decarbonisation within the EU and for those importing steel into Europe, green steel producers are also likely to need subsidies to cover the costs of ramping up production, says Charlotte Unger, a researcher at the Research Institute for Sustainability in Potsdam, Germany . In the case of Stegra, it will receive 265 million euros from the European Commission to help build its plant; it was also granted EUR 250 million from the Innovation Fund of the European Union.
Meanwhile, Stegra is working to reduce costs and increase revenue. Olof Hernell, director of digital technology, says the company has invested heavily in digital products to improve efficiency. For example, a semi-automated system will serve to increase or decrease electricity consumption according to its fluctuating price in the network.
Stegra realized that there was no sophisticated software to track the emissions the company produced at every step of the steelmaking process. So it’s making its own carbon accounting software, which it will soon sell as part of a new spinoff company. This type of accounting is extremely important to Stegra, Hernell says, because “we’re asking for a pretty significant premium, and that premium only lives within the promise of a low carbon footprint.”
