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Some of those automakers—including Volvo, which will buy from Stegra and competitors SSAB— whether they advertise cars made from green steel as “fossil fuel free.” And since cars and trucks also have many parts that are much more expensive than the steel they use, the steel that costs automakers a little more adds only a little to the vehicle’s price—perhaps a few hundred dollars or less, according to one estimate. Many companies have also set internal goals to reduce emissions, and purchasing environmentally friendly steel can bring them closer to those goals.
Stegra’s business model is partly made possible thanks to the unique economic conditions within the European Union. In December 2022, the European Parliament approved a tariff on imported high-carbon products such as steel, known as the Carbon Boundary Adjustment Mechanism (CBAM). Starting in 2024, this law requires those importing iron, steel and other goods to report the carbon emissions associated with the materials.
Starting in 2026, companies will have to start paying fees designed to be proportional to the material’s carbon footprint. Some companies are already betting that this will be enough to make Stegra’s 30% premium pay off.
A STEP UP
While the law could boost decarbonisation within the EU and for Europe’s steel importers, green steel producers will likely also need subsidies to cover the cost of the increase, says Charlotte Unger, a researcher at the Research Institute for Sustainability in Potsdam, Germany. In the case of Stegra, it will receive 265 million euros from the European Commission to help build the factory; it also received 250 million euros from the European Union Innovation Fund.
Meanwhile, Stegra is working to reduce costs and increase revenue. Olof Hernell, chief digital officer, says the company has invested heavily in digital products to improve efficiency. For example, a semi-automated system will be used to increase or decrease electricity consumption according to its fluctuating price in the grid.
Stegra realized that there was no sophisticated software to monitor the emissions produced by the company at every step of the steel production process. So it’s building its own carbon accounting software, which it will soon sell as part of a new spinoff company. This kind of accounting is extremely important to Stegra, Hernell says, because “we’re asking for a pretty significant premium, and that premium only lives within the promise of a low carbon footprint.”
