ArcelorMittal plans to test a greener manufacturing process at its plant in Florange

Pierre Heckler/Le Republicain Lorrain/Photopqr/Newscom

At the ArcelorMittal steel plant in Florange, France, smokestacks infuse the air with gray plumes, making

good show-and-tell for the steel industry's dubious distinction of being one of the world's leading

greenhouse-gas emitters.

But the picture could one day be cleaner. ArcelorMittal and a group of European steelmakers have a

$665 million plan to turn Florange into a model of environmentally friendly steelmaking that other steel

companies would be free to deploy. If it works, the steel industry could slash carbon dioxide CO 2

emissions 55%. That would make a sizable dent in the world's greenhouse-gas emissions, considering

that the steel industry contributes 8% of those gases, according to the McKinsey consulting firm. (See

pictures of the world's most polluted places.)

ArcelorMittal is part of a consortium of European steel companies called ULCOS, for Ultra-Low Carbon

Dioxide Steelmaking. It is taking part in one of several schemes coordinated by the Brussels-based

World Steel Association's CO 2Breakthrough Program to radically alter the way steel is made and

potentially wipe out CO 2emissions. That's crucial now that the demand for steel is booming again, driven

by a massive infrastructure buildup in China and the developing world. Last year the industry produced

1.6 billion tons of steel—China made 44% of that—beating 2007's record of 1.5 billion tons, according to

World Steel. Likewise, China used nearly half of the total world steel production last year.

Why should a dirty old industry like steel care about going green? Because Big Steel sees

greenhouse-gas reduction as a key to its longevity and profitability. For starters, it could save considerable money by switching to more efficient production that slashes its voracious power

consumption. "If proven, these technologies will tend to be more energy-efficient, and that will reduce

costs," says Ian Goldsmith, director of public affairs for Tata Steel Europe, which is part of ULCOS.

Steelmakers also claim to want to do their part for the planet.

Environmentalists don't buy that. They say the industry is greenwashing—talking a clean game while

moving slowly on greenhouse-gas initiatives. In Europe, Greenpeace and Friends of the Earth (FOE)

accuse steelmakers of lobbying against the European Union's proposal to raise 2020

emissions-reduction targets to 30% of 1990 levels, from the current 20% target. And they say the E.U.

should light a fire under Big Steel by cutting its free carbon credits in Europe's emissions-trading scheme,

which allows manufacturers to pay for the right to emit CO 2 . (See pictures of the effects of global

warming.)

Either way, steelmakers' quest for "ultra-low" carbon faces one staggering conundrum: the industry

depends on carbon—usually in the form of coke derived from coal—as a raw material for making new

product. Blast furnaces use coke as a key part of the chemical process that reduces iron ore and

converts it into liquid pig iron that steelmakers then convert to liquid steel before rolling it into finished

steel. Steelmakers have honed this process for centuries—good news for anyone interested in strong,

reliable steel but terrible for the environment.

Although 30% of all steel production comes from recycled scrap that avoids the carbon-intensive blast

furnace, China, because of its economic newness, has little or no steel to recycle. Greenpeace notes that

steelmakers in China, India, Brazil, Russia and South Africa use 1½ to 2½ times the energy to produce a

ton of steel as do their counterparts in Europe and North America.

The solution, then, is to change the whole chemical process of steelmaking. "The holy grail is to get away

from the use of carbon-based material in the production of iron," Goldsmith says. But holy grails are hard

to find. Steel companies in Europe, the U.S., Japan and South Korea are collaborating to replace

methods involving carbon fuels with others, including technologies that use hydrogen and electrolysis.

Although those methods would take carbon out of the steelmaking process, they are decades away from

being ready.

So ArcelorMittal—by far the world's biggest steelmaker—is focusing on another approach, the one

destined for Florange. There, it would capture waste gases CO 2and carbon monoxide and then reinject

the carbon monoxide, along with pure oxygen, into the blast furnace. The technique, called top-gas

recycling, would increase the furnace's efficiency and eat significantly into CO 2emissions, according to

Michel Wurth, a member of ArcelorMittal's group management board. It would also require a steelmaker

to store the captured CO 2in the ground--a costly, cutting-edge and controversial technique--in order to

get the full carbon-reduction potential.

In 2008, ULCOS proved that at least the capture part of the concept works, at a small prototype in Lulea,

Sweden, where it did not store the CO 2but let it loose into the atmosphere. It now hopes to build a larger

prototype at an ArcelorMittal plant in Eisenhüttenstadt, Germany, in 2012 and to retrofit an even bigger,

commercial-scale blast furnace in Florange with the technology by 2015. Once the company validates operations in Florange, it could use the facility for commercial production. Wurth cautions that testing

could take as long as five years, until 2020.

This underscores the point that the top-gas project is a big initiative fraught with challenges. Raising the

$665 million to cover costs at both Eisenhüttenstadt and Florange is one of them. ULCOS plans to apply

for a European Commission carbon-capture grant by the end of March, which would provide about half

the amount. The rest would come from ULCOS member companies and national governments.

Another challenge: the storage part of the equation could face public opposition. Both Greenpeace and

FOE oppose carbon capture and storage, a technology that has been proposed for many industries,

including oil, gas and power. Critics say it is an unproven, expensive technology and that stored carbon

could eventually leak into the atmosphere. "It is not a solution for climate change," says Joao Talocchi, a

Greenpeace climate-and-energy campaigner in Amsterdam. "The money should be invested in really

renewable energy sources," says Paul de Clerck, coordinator of FOE's Campaign for International and

Economic Justice, in Brussels.

In tandem with its top-gas scheme, ULCOS is developing another technology, led by Tata Steel, that

permits steelmakers to feed common, sand-size bits of iron ore called fines straight into a blast furnace,

eliminating the energy-intensive process of first sintering the fines into bigger chunks. The Tata technique

also uses coal directly instead of first converting it to coke—thus knocking out another energy hog.

Once ULCOS perfects either technology, all ULCOS members will be free to use it, in keeping with the

consortium's collaborative spirit. That means that in about 10 years, European steelmakers could have at

their disposal technologies that would on average reduce their CO 2emissions by half.

But what about the possibility of replacing technologies that use fossil fuels like coal and coke with those

that use noncarbon alternatives like hydrogen and electrolysis? ULCOS and some other steel-industry

experts believe those technologies are decades away, but the American Iron & Steel Institute seems a bit

more bullish. Larry Kavanagh, president of AISI's Steel Market Development Institute in Washington,

says hydrogen and electrolysis could be ready commercially by sometime in the 2020s.

The industry needs the breakthroughs desperately, because it has pushed the limits of CO 2reduction

through existing technology. "The level they've reached, they're really at the boundaries already," says

Michel Van Hoey, a Brussels-based partner at McKinsey. He notes that even though the industry is the

fifth leading producer of greenhouse gases in the world, CO 2emissions per ton of steel produced

tumbled 45% between 1960 and 2007. Industry measures have included the use of stronger iron ores

and the deployment of natural gas as a coke replacement. (Gas contains less carbon.) The industry can

also take credit for increasing the fuel efficiency of cars and the energy efficiency of buildings by making

stronger and lighter-weight steel. Another green feather in its cap: steel recycles as no other industry

does, as evidenced by that nearly one-third of product that World Steel says comes from scrap.

Yet the industry struggles to reduce that 8% of global greenhouse-gas emissions. Without the

technological breakthroughs described above, any new reductions will be a challenge. Indeed, the

dramatically increasing need for everything from railroads to bridges to shopping malls and new housing

developments in emerging markets that produce the dirtiest steel is going to make the clean-steel mission both more urgent and more difficult. "We're seeing a higher concentration of blast furnaces come

on board—especially in China," says McKinsey's Van Hoey. "The developing countries are the

challenge," notes Nick Sowar, an expert in global steel at consulting firm Deloitte. "An efficient steel mill

in Germany may get shut down when an inefficient one in China picks up the business." If the industry is

to really make a CO 2difference, the gray picture will have to change to green not just in Florange but

wherever else in the world steel is rolling out of a factory.