ABSTRACT
The iron and steel sector accounts for approximately 30% of total industrial emissions in East Asian countries. East Asian countries are among the largest producers of crude steel and also produce a large share of global emissions from steel. Unless there is a significant unexpected fall in steel demand, innovation within the sector is required to curb the carbon intensity of crude steel production; otherwise, the long-term emission reduction targets will become unattainable. From a policy maker’s perspective, the key question is how to incentivize the required technological shift.
In this chapter, we apply the FTT:Steel model for the first time and test a set of carbon tax scenarios. The model results show that the carbon taxes cause some shift in the choices of technologies used, but not by a sufficient amount to meet emission reduction targets. We also see some economic costs, resulting from higher costs of production and prices for steel. The technology transitions that do occur tend to be within technology groups, for example by adding CCS to existing sites or switching to biofuel inputs. This finding gives some clues to the additional policies that are required, for example, to support particular nascent technologies. This points to a direction for further research.
