Some automakers, including Volvo, are promoting vehicles made with green steel as “fossil-free” in collaboration with suppliers like Stegra and rivals. Although vehicles contain many costlier components that significantly impact their overall price, the expense of using green steel adds only a small amount to the final cost – potentially just a few hundred dollars or less, according to some estimates. Many companies have also set internal targets to reduce emissions and purchasing green steel can help them achieve these goals.
Within the European Union’s unique financial framework, Stegra’s business model is facilitated. By December 2022, the European Parliament endorsed a tariff on imported goods with high carbon content, specifically metals, implementing the Carbon Border Adjustment Mechanism (CBAM). By 2024, all entities importing iron, metals, and various commodities will be obligated to disclose their connected greenhouse gas emissions associated with these supplies.
By 2026, corporations will be incentivized to take action as they face charges commensurate with their environmental impact, specifically tied to the carbon footprint of their supply chains. Several major corporations are wagering that the 30% premium Stegra demands will prove a valuable investment in the long run.
STEGRA
According to Charlotte Unger, a sustainability researcher at the Analysis Institute for Sustainability in Potsdam, Germany, inexperienced steelmakers will likely require subsidies to offset the costs of upscaling, despite potential EU incentives driving decarbonization within the bloc and for importers of metal into Europe. Stegra is set to receive €515 million in funding from both the European Fee and the EU’s Innovation Fund to support the construction of its plant.
Meanwhile, Stegra is striving to curb price increases and bolster revenue streams. According to Olof Hernell, Chief Digital Officer, the company has made significant investments in digital assets to drive efficiency improvements. A semiautomated system can dynamically manage electrical energy usage, synchronizing it with real-time grid fluctuations to optimize efficiency and cost savings.
Stegra identified a lack of sophisticated software to monitor and track emissions throughout each stage of their steelmaking process. The company is developing its own personalized carbon accounting platform, which will be spun off into a separate entity and aggressively marketed to capitalize on the growing demand for sustainable solutions. According to Hernell, securing accurate accounting is crucial for Stegra because “we demand a fair premium, which relies entirely on the reliability of a low-carbon emissions record.”
