London Daily

Focus on the big picture.

Government to offer £600m for green steel switch

Government to offer £600m for green steel switch

The government is expected to announce hundreds of millions of pounds of support to help Britain's two biggest steelmakers go green.

The funding for British Steel and Tata Steel UK is likely to be unveiled by the Chancellor, Jeremy Hunt, this week.

Each is expected to receive around £300m of grants to help pay for a switch away from coal-fired blast furnaces and help with energy costs.

It will also protect thousands of jobs in Britain's industrial heartlands.

But the announcement will be controversial given the tough line the government is taking on pay settlements for public sector workers including nurses and ambulance drivers.

Central to the offer of support are the companies' blast furnaces. These use vast quantities of coking coal, a treated form of coal, to smelt iron from ore-bearing rock. As a result they produce huge amounts of carbon dioxide, which drives global warming.

The Department for Business, Energy and Industrial Strategy told the BBC it was working closely with the steel industry to secure what it describes as "a sustainable and competitive future". Sources told the BBC last week that a £300m funding package was being considered for British Steel.

This follows a request by British Steel, which is owned by Chinese company Jingye, for hundreds of millions of pounds of grants to prevent the closure of its blast furnace at Scunthorpe in Lincolnshire.

However, sources close to Tata Steel, the Indian-owned company which runs the UK's largest steel plant in Port Talbot in South Wales, say £300m may not be enough to persuade it to make the vast investment needed.

Internal company estimates are understood to put the cost of switching the company's Port Talbot works to producing emissions-free "green steel" at up to £3bn.

One industry expert said an offer to cover 10% of the costs may not be sufficient.

A deal needs to come soon, the head of the Unite Union, Steve Turner, has told Business Secretary, Grant Shapps.

The steel industry is "a whisker away from collapse" Mr Turner said in a letter last week.

Foreign competition

Last year Tata warned it could be forced to close its UK operations if it did not receive support to help it move to less-carbon intensive production. Henrik Adam, the CEO of Tata's operations in Europe, has told the BBC the company needs "the same support" as its competitors abroad.

He said government investment was necessary to help the Port Talbot works transition to the production of green steel. He said on-going assistance was also needed to ensure energy costs were similar to those of its rivals, particularly in Europe.

The UK can not depend on steel from abroad, he warned. "Recent geopolitical events" have shown the risks of relying on imports only, said Dr Adam.

Tata produces about 3.6m tonnes of steel a year in the UK, a process which uses enough energy to power more than 600,000 UK homes.

It has a correspondingly huge carbon footprint. The Port Talbot plant is responsible for 2% of UK carbon emissions and more than 15% of Wales' emissions.

It has long been recognised that traditional steel production, with its reliance on coal to produce iron, is not compatible with the UK's legally binding commitment to massively reduce CO2 emissions in the coming decades.

There are two main options for the production of low-carbon or "green steel". A plant in Sweden is already making iron using hydrogen instead of coal. But to do so in the UK would require a huge investment in green hydrogen to ensure supplies of the gas from renewable sources.

The more likely option for the two UK plants is a switch to electric arc furnaces. These could recycle the large amount of scrap steel the UK produces and could be powered by electricity from renewable sources.

Both options would mean the future of British steel won't involve coal, says Tata's Henrik Adam. That raises questions about another aspect of the government's industrial policy, the viability of a proposed new coal mine in Cumbria.

West Cumbria Mining, the owners of the new mine, refused to comment on the implications of a switch to coal-free steel in the UK.

The government's cash is expected to be dependent on pledges of investment from the two steel companies and a guarantee that their plants will continue to operate to 2030.

Tata's Laura Baker: 'We can really be part of the UK's net zero future'

Workers at the Tata plant say they are optimistic about the plans for low-carbon production.

"It is so exciting to think about the future of this plant and the impact that we can have on decarbonisation for the whole of the UK", said Laura Baker, who creates the "recipes" that ensure the steel made in the Port Talbot plant meets the precise requirements of its customers.

"Our customers are really wanting us to decarbonise so that they can decarbonise their own supply chains', she said.

But should hundreds of millions of pounds of taxpayers' money go to help private companies like Tata and British Steel upgrade their facilities?

"I think there is a role for government to provide targeted support in the first stages of a completely new technological deployment", said Lord Adair Turner, the chairman of the Energy Transitions Commission, a group of business leaders who want to speed up the decarbonisation of the global economy.

"We can't be purist about this, the US is now doing this on a massive scale", he said, referring to the Inflation Reduction Act which involves almost $400bn of funding for low-carbon energy and climate change.


Related Articles

London Daily
UK Man Jailed for Non-Consensual Condom Removal
Reform UK Surpasses Conservatives in Historic Poll
US, Britain, Canada Accuse Russia of Interference in Moldova’s Election
Taylor Swift Fans Create Seismic Activity in Edinburgh
Sunak Aide Under Investigation for Election Bet
Labour Leader Starmer Focuses on Wealth Creation for Upcoming UK Elections
G7 to Use Frozen Russian Assets for $50 Billion Ukraine Aid
Anti-Israel Irish MEP Clare Daly LOST her seat in the EU Election
Johnson & Johnson Settles Talc Safety Claims for $700 Million
EU Urged to Welcome Skilled Russians to Weaken Putin
EU Elections Overview: Far-Right Gains and Major Political Shifts
Israel Rescues Four Hostages from Gaza
Emmanuel Macron Calls for Snap Election
Jordan Bardella: Young Far-Right Leader Poised for Future Political Influence in France
World's Oldest Privately Owned Book Auctioned for $3.8 Million
Animal Rights Activists Deface King Charles' Portrait in Protest
Dutch Military Intel Uncovers Extensive Chinese Cyber Espionage
Turkish Student Arrested for Using AI to Cheat in University Exam
Rise in Dengue and Other Mosquito-Borne Diseases in Europe Due to Climate Change
EU Elections Overview: Far-Right Gains and Major Political Shifts
Far-Right National Rally Dominates France's EU Vote
Macron Calls Snap Legislative Elections After Far-Right Victory
Far-Right Gains Significantly in EU Election
UK Job Market Shows Signs of Recovery
Orban’s Fidesz Party Wins Majority in Hungary’s EU Elections as New Challenger Emerges
Meloni's Far-Right Party Wins European Elections in Italy
Key Insights from the European Union Elections
European Union Elections and Rise of Far-Right Parties
England Loses Over 260,000 Social Rent Homes in a Decade
Campaigners Urge Government to Block Shein's FTSE Listing
First NHS AI-Run Physiotherapy Clinic Launches This Year
British TV Presenter Michael Mosley Found Dead on Greek Island
Ukrainian Forces Claims First Strike on Russia's Su-57 Fighter Jet
Macron Dissolves Parliament and Calls Snap Elections
Russia Adds Yulia Tymoshenko to Wanted List
UK Foreign Secretary David Cameron Tricked by Hoax Caller Posing as Former Ukrainian President
Kate Middleton's Absence from Colonel's Review Due to Chemotherapy
UK Foreign Secretary Deceived by Prank Video Call
Sunak Criticised Over D-Day Exit in BBC Debate
Rishi Sunak Apologizes for Leaving D-Day Commemoration Early
UK Woman Sentenced After Causing Fatal Crash While Sending Selfies
Danish Prime Minister Mette Frederiksen Assaulted in Central Copenhagen
UN to Add Israel to Human Rights Blacklist
Germany and France Oppose EU Luxury Car Restrictions to Russia
Plus-Sized Miss Alabama Sara Milliken Responds to Online Critics
Nigel Farage's Return Boosts Support for Reform UK Party
Labour Party to Pledge Recognition of Palestinian State in Election Manifesto
British Paratroopers Greeted by French Customs After D-Day Anniversary Airdrop
UK Statistics Watchdog Chief Urges Sunak to Clarify Labour Tax Claim Source
UK Conservatives Promise to Restore Child Benefit for Higher Earners