The UK’s Green Alliance believes that British Steel and Tata Steel, the UK’s two largest steelmakers, should shift half of their production to electric arc furnaces (EAF) to receive state subsidies.
Analysts have urged the government to include a green transition clause in the £600m support package for steelmakers.
In their view, any new financing must depend on companies committing to switching from coking coal to EAF-assisted production.
The companies’ integrated plants in Scunthorpe and South Wales account for 95% of the UK’s iron and steel sector emissions due to reliance on blast furnaces.
All four blast furnaces installed in the companies must be retrofitted before 2035, and two of them need serious repairs before the end of the decade.
It involves providing British Steel and Tata Steel with subsidies of around £300m each to help them keep jobs and protect employees.
The UK steel sector is currently suffering from rising energy prices and carbon emissions, competition from cheaper imports and inflationary pressures.
The Green Alliance warned that the long-term competitiveness of the sector requires a financing package that takes into account the conditions under which the country could become a low-carbon steel producer in the future.