Is Trump's Steel Trade War Good for the Climate?

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President Trump just suggested to impose a 25% tariff on steel imports. While there are mix reactions to this announcement and many say it can lead to a trade war, I thought to look at it from climate change point of view. Is a U.S. tariff on steel imports good for the climate? The answer is it depends on where we are importing steel from. I will discuss this in more details below. According to USGS, U.S. imported around 36 million ton of steel in 2017, which equals to about 43% of total steel production in the U.S. that year.

Iron and steel production is an energy and carbon dioxide (CO2) intensive manufacturing process. Two types of steel production dominate the industry: blast furnace/basic oxygen furnace (BF/BOF) and electric arc furnace (EAF) production. BF/BOF production uses iron ore to produce steel. The reduction of iron ore to iron in a BF is the most energy-intensive process within the steel industry. EAF production re-melts mainly scrap to produce steel. BF/BOF production is more energy intensive and emits more GHG than EAF production.

A few years ago, when I was working at Lawrence Berkeley National Laboratory, I led a study to compare the CO2 intensity of steel production in four major steel producing countries: China, Germany, Mexico, and the U.S. We defined a similar boundary for the steel industry in these countries and adjusted the CO2 intensity based on net import of fuel and intermediary products (e.g. net imported pig iron, direct-reduced iron (DRI), pellets, lime, oxygen, ingots, blooms, billets, and slabs). The result of our study is presented in the graph below. More results and scenario analysis can be found in the report we published (see link at the bottom). Our analysis used 2010 data because that was the latest year for which the data were available for all four countries at the time of the study.

 Figure. CO2 intensity of the iron and steel industry in China, Germany, Mexico, and the U.S. in 2010 (Hasanbeigi et al. 2016)

Figure. CO2 intensity of the iron and steel industry in China, Germany, Mexico, and the U.S. in 2010 (Hasanbeigi et al. 2016)

As can be seen from the Figure above, China has the highest and Mexico has the lowest total steel industry CO2 intensity. The total CO2 intensity of the Chinese steel industry is almost twice that of the Mexican steel industry. Two main reasons for low total CO2 intensity in Mexico’s steel industry are: a) Mexico has the largest share of EAF steel production among the four countries studied (69% in 2010), and b) Mexico’s steel industry consumes a larger share of natural gas compared to that in other countries studied. This results in a lower average emissions factor for fuels in Mexico. Another interesting point to note is that the total CO2 intensity of the German steel industry is 2% lower than that of the U.S. which is remarkable given that, in 2010, Germany had a lower share of EAF steel production (30% of total production) than the U.S. (61% of total production). However, it should be noted that the U.S. steel industry would have had lower CO2 intensity if we had not adjusted for net import of intermediary products to the steel industry, but that would have not been an accurate comparison. 

Our analysis also showed that the CO2 intensity of BF/BOF steel production alone in the U.S. is significantly higher than that in other three countries. This could be because of various reasons such as older BF/BOF plants and lower penetration of some major energy efficiency technologies such as coke dry quenching (CDQ) and top-pressure recovery turbine (TRT) in blast furnaces, etc.

Some of the key factors influencing the CO2 intensities of the steel industry are: share of EAF from total steel production, the age of steel manufacturing facilities in each country, the level of penetration of energy-efficient technologies, the scale of production equipment, the fuel shares in the iron and steel industry, the steel product mix in each country, the CO2 emissions factor of electricity grid, etc.

Figure below shows the Top 10 countries from which U.S. imported steel in 2014.

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Even though our aforementioned study did not include all the countries from which U.S. imports steel, many of them are known for having low energy and carbon intensive steel industry and/or having high EAF steel production share, which helps to reduce the CO2 intensity of their entire steel industry. Figure below shows the share of EAF steel production (one of the key factors influencing overall CO2 intensity of the steel industry in a country) in top 10 counties from which U.S. imports steel.

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It worth mentioning that U.S. also exported around 11 million ton of steel in 2017, around 90% of which went to Canada and Mexico. In fact, even though Canada and Mexico are among top countries from which U.S. imports steel, U.S. export more steel to Canada and Mexico than imports from them. Therefore, imposing steel import tariffs for these two countries does not seem to be effective.

To sum up, the U.S. tariff on steel imports can be good for the climate if it is based on carbon footprint of the steel imported and not just a blanket tariff. In fact, state of California recently passed a Buy Clean regulation, which calls for the state to create rules for the procurement of infrastructure materials (including steel) purchased with state funds that take into account pollution levels during production. It was one of the rare cases where both environmentalist and industry advocates agreed and backed the regulation. This could be an example of environmental- and climate-friendly procurement and trade tariffs that can benefit both industry and the environment and incentivize high polluting companies that are out-of-state or-country to clean up their production in order to be able to trade with these states or countries.

Needless to say, an import tariff on steel could result in a major trade war that will include other industrial sectors and products.

More details of our steel industry CO2 intensity comparison analysis and results are presented in the report that is published on LBNL’s website and can be downloaded from this Link.

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Also read our related blog posts:

Some of our related publications are:

  • Hasanbeigi, Ali; Arens, Marlene; Rojas-Cardenas, Jose; Price, Lynn; Triolo, Ryan. (2016). Comparison of Carbon Dioxide Emissions Intensity of Steel Industry in China, Germany, Mexico, and the United States. Resources, Conservation and Recycling. Volume 113, October 2016, Pages 127–139
  • Zhang, Qi; Hasanbeigi, Ali; Price, Lynn; Lu, Hongyou; Arens, Marlen (2016).  A Bottom-up Energy Efficiency Improvement Roadmap for China’s Iron and Steel Industry up to 2050. Berkeley, CA: Lawrence Berkeley National Laboratory. LBNL- 1006356
  • Morrow, William; Hasanbeigi, Ali; Sathaye, Jayant; Xu, Tengfang. 2014. Assessment of Energy Efficiency Improvement and CO2 Emission Reduction Potentials in India’s Cement and Iron & Steel Industries. Journal of Cleaner Production. Volume 65, 15 February 2014, Pages 131–141
  • Hasanbeigi, Ali; Price, Lynn, Aden, Nathaniel; Zhang Chunxia; Li Xiuping; Shangguan Fangqin. 2014. Comparison of Iron and Steel Production Energy Use and Energy Intensity in China and the U.S. Journal of Cleaner Production, Volume 65, 15 February 2014, Pages 108–119
  • Hasanbeigi, Ali; Morrow, William; Sathaye, Jayant; Masanet, Eric; Xu, Tengfang. (2013). A Bottom-Up Model to Estimate the Energy Efficiency Improvement and CO2 Emission Reduction Potentials in the Chinese Iron and Steel Industry. Energy, Volume 50, 1 February 2013, Pages 315-325
  • Hasanbeigi, Ali; Arens, Marlene; Price, Lynn; (2013). Emerging Energy Efficiency and CO2 Emissions Reduction Technologies for the Iron and Steel Industry. Berkeley, CA: Lawrence Berkeley National Laboratory BNL-6106E.

References

  • Hasanbeigi, Ali; Arens, Marlene; Rojas-Cardenas, Jose; Price, Lynn; Triolo, Ryan. (2015). Comparison of Energy-Related Carbon Dioxide Emissions Intensity of the International Iron and Steel Industry: Case Studies from China, Germany, Mexico, and the United States
  • Hasanbeigi, Ali; Arens, Marlene; Rojas-Cardenas, Jose; Price, Lynn; Triolo, Ryan. (2016). Comparison of Carbon Dioxide Emissions Intensity of Steel Industry in China, Germany, Mexico, and the United States. Resources, Conservation and Recycling. Volume 113, October 2016, Pages 127–139
  • USGS, 2018 and 2014. Iron and Steel
  • Buy Clean California. http://buycleancalifornia.org