Switching to green steel would add just EUR 8 per electric vehicle by 2040

Switching to 40% green steel would add just EUR 57 to the sticker price of an electric vehicle in 2030, according to Transport & Environment (T&E), which published an analysis based on a study by consultancy Ricardo.

Switching to 100% green steel by 2040 will cost only EUR 8 more per electric vehicle than conventional steel due to CO2 pricing and the falling costs of green steel production, T&E said.

Steel made with green hydrogen and electric arc furnaces, or produced from scrap, can reduce the CO2 emissions of car production in Europe by 6.9 Mt in 2030, which is equivalent to avoiding the annual emissions of 3.5 million fossil fuel cars, the analysis shows.

The automotive sector currently consumes 17% of steel in the EU

The organisation added that the automotive industry could become a lead market for European low-carbon steel production if lawmakers set content requirements. T&E said at least 40% of steel in new cars should be required to be green by 2030, rising to 75% in 2035 and 100% in 2040.

However, securing the billions of euros in investment needed for low-carbon steel production will depend highly on having a reliable offtake market for producers.

The automotive sector is very well positioned to create the demand as it currently consumes 17% of steel in the European Union. T&E called on lawmakers to help create a lead market for green steel in Europe by setting targets for carmakers to use an increasing amount of it in new cars starting in 2030.

For less than a tyre change, Europe can build a green steel industry

Alex Keynes, cars policy manager at T&E, claimed that Europe could build a green steel industry for less than a tyre change. “The extra cost will be negligible, and in time, it will be cheaper than conventional steel. But we first need lawmakers to kick start the shift to low-carbon steel in the automotive industry,” she stressed.

The report finds that Europe will be able to produce up to 172 megatons of low-carbon steel a year by 2030, based on Ricardo’s tracking of production announcements. This will be more than enough to meet the total demand for steel by the automotive sector, which consumed 36 megatons in 2022.

“The relatively high value of cars, especially premium brands, means that the automotive industry can absorb the short-term green premium of low-carbon steel,” Keynes added.