A window of opportunity: five ways IFIs can support the transition to green steel in emerging and developing economies.

2 November 2022

Written by Aaron Maltais, Linus Linde, Felipe Sanchez, Gökce Mete

Key messages

The need for emerging and developing to leapfrog to green steel production provides a unique opportunity for international financial institutions to support the global steel transition by:

  1. Acting as knowledge partners for governments to strengthen an enabling policy framework for green steel
  2. Supporting country roadmaps for green hydrogen
  3. De-risking and financing first movers in industrial production, small and medium-sized enterprises in green value chains, and utility-scale renewables
  4. Supporting demand for green steel through procurement strategies in IFIs’ own operations
  5. Supporting secondary steel production and circular business models to scale up scrap-based production

Steel production is set to increase with a significant amount of capacity added in developing and emerging economies. Emerging and developing countries could be at the forefront of the steel transition, but to achieve this, low-carbon technologies need to be financed and implemented – international financial institutions could kick-start the transition.

Demand for steel is expected to increase in the coming decades as population growth, industrialization, and urbanization in emerging economies continue. A substantial amount of new steelmaking capacity will be added in developing and emerging economies by 2030: this marks a geographic shift in global steel production to emerging economies where there is the greatest need for support for implementing low-carbon steel production.

Research shows that all new plants post-2025 must be strictly low-emission, but there remains a large gap between announced carbon-intensive and low-carbon capacity in the pipeline. Most new low-carbon projects for primary production are in high-income countries and China, while developing and emerging economies to a large extent are planning on high carbon capacity additions.

Very few international financial institutions (IFI) have strategies to support green steel production but there is a growing momentum to develop them. IFIs can play an important role in kick-starting the transition to green steel, especially in emerging and developing regions.

International cooperation to reduce the risks of investments in green steel in emerging and developing economies is critical to making sure the green industrial revolution is a global one”

Aaron Maltais

Policy and Roadmaps Lead, LeadIT

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