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Climate Leadership Series: Dr. Alan Knight, Large Emitters, and the Circular Economy

Rebecca Fay | 04 January 2018 |

In this Climate Leadership article, Jonathan Shopley speaks to Dr. Alan Knight, Corporate Responsibility General Manager of multinational steel manufacturing corporation ArcelorMittal, to explore the role of the large emitters in the response to climate change, and to discover how ArcelorMittal is supporting circular economy principles.

In this Climate Leadership series, we ask experts and influencers in business climate action to share their insight into best practice, discuss current and future trends, and debate the most impactful solutions. Find out more about Alan Knight at the bottom of this article.

Jonathan Shopley: Alan, you’ve occupied some intriguing corporate sustainability roles during your 27-year career - working for B&Q, Kingfisher, SABMiller and advising the Virgin Group, for example. And now that you are working for ArcelorMittal, the global leader in integrated steel and mining, you arguably work in one of the most challenging roles in terms of decarbonising our economy. Can you explain how such a large emitter fits into the transformation being driven by climate change?

Alan Knight: First, let’s be clear - steel is everywhere. It has been essential for economic development in the past, and will be an essential material as we transition to a low carbon economy. On average, there are 10 tonnes of steel in everybody’s life. We share some of those tonnes because of the motorway crash barriers, tracks on the underground, the foundations of our houses, cars, paperclips and staples in our offices, even the wire in champagne corks. If you waved a magic wand and made all the steel in the world disappear, every building would fall down, infrastructure would collapse, all wind turbines and solar panels would disappear. If you believe in sustainability, you believe in steel.

ArcelorMittal’s carbon footprint, however, is large, at just under 200 million tonnes a year, which represents around 0.7% of the world’s carbon emissions. This is because, as I said, there is so much steel in use, and we are the largest steel producer in the world. This, however, does not justify complacency.

First, we are working to achieve a target we set a few years ago. ArcelorMittal’s climate target is 8% carbon reduction by 2020. As 8% of 200 million probably represents more emissions than some of the corporates in a climate conference put together, that’s significant. When we look at the absolute size of a business’ carbon footprint, rather than the percentage, I am proud to work for a company that reduced its emissions by what would have been 15 million tonnes! Again, this does not justify complacency - expectations from civil society are for a longer-term and more ambitious target. This requires collaboration between our strategy, technical, finance and government affairs departments. Bolder targets require new technology and new incentives.

JS: So why is it so difficult to decarbonise steel?

AK: There are technical challenges and policy challenges. Let me talk technical. Most of ArcelorMittal’s emissions come from the chemical reaction required, rather than the energy required, to turn iron ore and coal into steel. We cannot replace that coal with wind turbines; that’s like asking a brewery to make beer without yeast, or cows to stop eating food.

So, as a company, we have to think differently, and look at the whole lifecycle of the steel. In fact, steel as a material is almost infinitely reusable. But going beyond that, there is an enormous amount of opportunity for us in the circular economy with our by-products.

For every one tonne of steel, an average of 2.1 tonnes of carbon is emitted and around 300kg of slag is produced. The concrete industry can then use this to produce cement, instead of using raw limestone. So cement companies can then claim zero emissions from the slag they use. In addition, one of our plants is making the raw materials for windscreens from our by-products.

We believe in Carbon Capture and Utilisation (CCU). We are piloting a CCU plant with LanzaTech, with the intention of turning our carbon emissions into ethanol, the raw material for plastic and biofuel - which can be blended with conventional gasoline fuel cars or even used as jet fuel.

It would also be feasible to use waste wood and even plastic to substitute small quantities of coal. These actions alone are not going to decarbonise steel to the targets expected from Paris, but it shows that we see how key new technologies and business models are.

The emerging narrative is about harnessing industrial ecology practices to create a more closed-loop carbon cycle for steel. Our problem is high carbon, and our solution is the circular economy, which will help get us to a low carbon economy.

JS: What is stopping us from making progress?

AK: That is where the policy challenge comes in. If and when technical solutions are found - what incentives are there to fund the investments? The incentives to change are not as strong as they could be. As you know, the European Community has its own Emissions Trading Scheme. This, however, is not a good incentive for us, mainly because of leakage. Our customers buy steel from a global market and we face the risk of them simply choosing steel made in countries without such pricing. One solution could be a border tax on imports but there might be others. Our government affairs colleagues have devoted a lot of time to working with the Commission, but we still face the prospect of the ETS more likely changing where in the world steel is made, rather than how it is made.

JS: What could we do differently to avoid this?

AK: Twenty years ago, if we knew what we know now, we - and by “we” I mean the climate movement - might have framed the policy response to climate change as sector-based. Our traditional policy-led approach is nation-based, but by grouping emitters by industry, we could more easily involve the high emitters in the design of carbon reduction mechanisms that are bespoke and work for their sector. Geographical-based carbon systems might be stifling the conversation, when really we need to talk about it peer to peer and industry to industry. Just because regional carbon pricing has helped decarbonise energy, that does not mean it works for steel.

We also need to consider the power of markets in enabling the prioritisation of climate action in the most inefficient sectors and areas. Most of our plants in Europe are quite efficient, but actually, they were already quite efficient. Our less efficient plants are in countries with no carbon price. Therefore, the question becomes: do we invest in making European plants even more efficient, or bringing our other plants up to the existing European levels? The latter will result in a greater reduction, but policy pushes us to focus on Europe.

At the moment, steel doesn’t have a natural place in climate change discussions. As a large emitter, which makes an essential material, we need to be brought into the debate. We need a place to truly share our experience and ideas.

Climate change solutions advocate a world that does not rely on fossil fuels, but the world will continue to rely on steel. We need steel, and we need to listen more to the biggest emitting companies, because they represent whole percentages of our global emissions.

JS: If you could do one thing, what would it be?

AK: I would like to facilitate a conversation between the 50 largest carbon emitters. You wouldn’t need many of the world’s highest emitting companies in the room to get to 25-30% of global emissions. What would they say is the best way to decarbonise the global economy?

Or, let’s think bigger. Imagine what could happen if the top 1,000 largest emitters got together to discuss climate action, from the materials sector (cement, steel and chemicals), energy sector, and even dairy and meat production.

JS: You’ve got a track record of taking very thorny issues and making them actionable, for example in your former role at B&Q where you helped create the Forest Stewardship Council (FSC) standard with WWF. What can you apply from that journey to this?

AK: In the journey to developing the FSC, I boiled it down to three or four big asks, which most people in the forestry and timber industries could remember. And it worked: we created a standard and a system that has led to significant changes in the sustainable management of forests. We’re in the process of establishing what these three or four big asks are of the steel industry.

We need to put money towards research into how we can really decarbonise steel. Then, technological solutions would need to be scaled up, and there needs to be an incentive to invest in them.

Overall, we are aiming to transition to something better over a period of time, while creating jobs and wealth, and decarbonising other sectors like cement and agricultural fertilisers at the same time. We need to turn this into a positive narrative that people are inspired by, and I think we’re getting there.

About Dr. Alan Knight, OBE

Alan Knight is General Manager for Corporate Responsibility at ArcelorMittal, and has more than 25 years’ experience advising organisations such as B&Q, Kingfisher and SABMiller on global sustainable development issues. Alan was instrumental in founding and developing the Forest Stewardship Council. Before joining ArcelorMittal in 2014, Alan served as Sustainability Director at Business in the Community, where he oversaw its corporate sustainability programmes. Alan was awarded the OBE in June 1998, in 2005 the US-based Rainforest Alliance presented him with a lifeltime award, and in 2013 he was made an honorary fellow of the Society for the Environment. He is a senior associate of the Cambridge Institute for Sustainability Leadership, and co-founder of the Global Association for Corporate Sustainability Officers (GACSO).

Keep an eye out for the next article in the Climate Leadership series in the coming weeks.