Mitigating Emissions in the Global Steel Industry: Representing CCS and Hydrogen Technologies in Integrated Assessment Modelling

We conduct a techno-economic assessment of two low-emissions steel production technologies and evaluate their deployment in emissions mitigation scenarios utilizing the MIT Economic Projection and Policy Analysis (EPPA) model. Specifically, we assess direct reduced iron-electric arc furnace with carbon capture and storage (DRI-EAF with CCS) and H2-based direct reduced iron-electric arc furnace (H2 DRI-EAF) which utilizes low carbon hydrogen to reduce CO2 emissions. Our techno-economic analysis based on the current state of technologies found that DRI-EAF with CCS increased costs ~7% relative to the conventional steel technology. H2 DRI-EAF increased costs by ~18% when utilizing Blue hydrogen and ~79% when using Green hydrogen. The exact pathways for hydrogen production in different world regions, including the extent of CCS and hydrogen deployment in steelmaking are highly speculative at this point. In illustrative scenarios using EPPA, we find that, using base cost assumptions, switching from BF-BOF to DRI-EAF or scrap EAF can provide significant emissions mitigation within steelmaking. With further reductions in the cost of advanced steelmaking, we find a greater role for DRI-EAF with CCS, whereas reductions in both the cost of advanced steelmaking and hydrogen production lead to a greater role for H2 DRI-EAF. Our findings can be used to help decision-makers assess various decarbonization options and design economically efficient pathways to reduce emissions in the steel industry. Our cost evaluation can also be used to inform other energy-economic and integrated assessment models designed to provide insights about future decarbonization pathways.