Studies have shown that a green steel path would accelerate Ukraine’s post-war reconstruction

As the international community gathers to discuss Ukraine’s post-war recovery, new analysis from the University of Oxford shows that green steel should be at the forefront of the agenda.

According to researchers at the University of Oxford, rebuilding Ukraine’s devastated steel sector after the cessation of hostilities provides an excellent opportunity to capitalize on the striking economic benefits of low-GHG steel production.

In a new report, “Techno-economic optimization of steel supply chains in the clean energy transition: a case study of post-war Ukraine,” published in the journal Journal of Cleaner Productionshow that rebuilding the Ukrainian steel sector to near-zero emissions would generate additional gross value added of $164 billion compared to a path based on traditional carbon-based steel production.

Moreover, a robust green steel sector in Ukraine would have ripple effects throughout the economy, for example by strengthening links in the supply chain. For example, replacing coal as the main source of heating in steel furnaces with renewable energy would radically shift the center of gravity of the Ukrainian steel industry from the eastern regions towards the western and southern ones and would accelerate economic growth.

Steel is an important component of Ukraine’s economy. Before the war, Ukraine was the 14th largest global steel producer with a production of 21.4 million tons of crude steel in 2021. However, its pre-war steel industry was also one of the dirtiest in the world. In 2020, the Ukrainian steel industry was responsible for 48 million tons of CO2₂: 15% of all CO in the country₂ emissions. However, if Ukraine joined the EU, it would be subject to the EU Green Deal target for near-zero emission steel by 2030.

In a new study, researchers note that Ukraine has clear potential to develop the clean energy infrastructure needed to fully transition to green steel – including a robust supply of renewable energy and green hydrogen produced using renewable energy.

Ukraine also has huge reserves of iron ore – the main raw material needed to produce steel from virgin materials – and is well located for access to European customers.

However, successfully rebuilding the Ukrainian steel sector will require access to capital, a clear climate policy and strong regional trade links.

Scientists propose that new green steel mills should be located near western cross-border railway crossings and southern Black Sea ports, alongside optimal sources of solar and wind energy.

This would significantly increase demand for land and sea transport services, redirecting them to Western/EU markets, and create new demand for the production of green hydrogen and green ammonia for non-fossil fuels.

According to the report, a full recovery of steel production in Ukraine would require investments worth $62 billion over 20 years: $45.9 billion in renewable energy infrastructure, $6.6 billion in energy storage and $9.5 billion in iron and steel furnaces steel. However, this investment would have broader impacts: in 2021, for every dollar invested in Ukraine’s primary metals industry, an additional $3.28 was generated in other sectors of the economy.

The World Bank estimates that it will require $486 billion to fully cover Ukraine’s post-war reconstruction and rehabilitation needs. By comparison, Ukraine’s green steel investment needs represent 6% of the country’s total post-war reconstruction needs in the first 10 years.

A positive step forward is the recent commitment of domestic players (including large Ukrainian steel producers Metinvest and ArcelorMittal) of $35 billion to a medium-term strategy to transition to green steel by 2035, which means the remaining amount needed will be much lower (Metinvest , 2023).

Ultimately, Ukraine could provide the perfect blueprint for the urgently needed global transition to low-carbon steel production. All over the world, the steel industry produces more CO2₂ than any other manufacturing and construction industry, generating approximately 8% of total global emissions – 2.8 gigatonnes of CO₂ per year. For comparison, international air transport is responsible for 2.5% of global CO emissions₂ emissions.

With potential international donors and private investors gathering in Berlin on June 11-12 for the 2024 Conference for Ukraine Reconstruction – an annual high-level political event aimed at mobilizing international support for Ukraine – researchers hope that ecological steel will become an important topic in the program.