Opinion

The auto industry’s carbon emissions from steel are extremely high – we estimate that they rival those of the entire country of Australia. On average, steel contributes 30 to 40 per cent of a vehicle’s material emissions. With the transition to battery electric vehicles, the portion of steel in auto emissions is growing. By 2040, materials are on track to account for 60 per cent of automotive life-cycle emissions, according to a McKinsey analysis.

In East Asia, which is home to 60 per cent of global crude steel production, the impact of CBAM will be especially pronounced. Analysts have forecast that CBAM-related tariffs on steel exports from China could reach over US$350 million, and tariffs on steel exports from South Korea could be nearly US$200 million.

In the future, carmakers and other downstream producers are likely to seek out steel suppliers with lower carbon intensity to avoid sky-high tariffs.

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However, carmakers have yet to take even the most basic step towards reducing their emissions from steel: disclosure. In our recent study of 16 major carmakers, not a single one had published its emissions specifically associated with steel. In addition, no carmaker included in our study had set a distinct target for steel decarbonisation.

In certain cases, carmakers and steelmakers have established low-carbon steel partnerships, but the effectiveness of these projects has been limited. To date, such partnerships have either been very small in scale or are still in the development stage.

In Japan, Toyota and Nissan claim to or plan to use low-carbon steel for select vehicles, but the scope is so small that it has little impact on the carmakers’ emissions from steel.

From a climate perspective, the need to reduce emissions from steel is urgent. The iron and steel industry currently accounts for 11 per cent of global carbon dioxide emissions and is a significant source of toxic air pollution. To align with global climate commitments, we estimate that carmakers must more than halve their emissions from steel by 2030.

Although the reduction of steel emissions is a daunting task, carmakers can take a series of clear steps to work in this direction.

First, carmakers must disclose their steel-related emissions. Next, they should issue public commitments to procure low-carbon steel. Clear targets would send a strong signal to steelmakers of the need to decarbonise.

Finally, carmakers must target net zero emissions across their supply chains, via both decreased steel usage and full adoption of low-carbon steel.

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It would be prudent for these carmakers to lay out ambitious steel decarbonisation targets now, alongside their electrification road maps, before they once again find themselves falling behind in the race.

Wenjie Liu is a senior analyst at Greenpeace East Asia. She is based in Tokyo