New Zealand on Track for Greener Steel

A runner exercises along Tamaki Drive on Auckland's waterfront in Auckland, New Zealand, on Aug. 24, 2021. (Fiona Goodall/Getty Images)

New Zealand (NZ) could have significantly lower carbon steel production after announcing that the country’s largest emissions reduction project entered the execution phase on Sept 8.

The NZ government first announced the project with New Zealand Steel in May. The partnership allowed the government to co-fund the installation of the country’s largest emissions reduction project—Electric Arc Furnace. Production is expected to start mid-2026, aligning with the agreed commissioning milestones.

Electric Arc Furnace would see half of the coal used at Glenbrook Steel Mill replaced with electricity to recycle and reuse scrap steel. NZ Steel owns the mill which is 40 kilometres (25 miles) south of Auckland.

Climate Change Minister James Shaw said installing the Electric Arc Furnace meant NZ Steel would cut emissions by more than 45 percent, equal to removing approximately 300,000 cars from roads.

“Once commissioned, the completed project will reduce Glenbrook’s carbon footprint by 800,000 tonnes annually. That means 100 percent of its annual steel production will be lower carbon from day one,” Mr. Shaw said.

“This project will mean the production of very low carbon steel by world standards—that’s a win for New Zealand.”

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Further, the project would eliminate one percent of NZ’s total annual emissions and greatly benefit the country’s environment, industry, and people, a move the government said adds real momentum in pushing fossil fuels out of the energy system and lowering emissions through renewables and energy efficiency.

NZ Steel has been a part of the community for nearly 60 years. This co-investment secures NZ’s steelmaking for more years and sustains critical domestic steel supply into the low-carbon, climate-resilient future.

Meanwhile, the co-investment was the first in several bespoke opportunities the government explored to deliberately target appropriate support for the country’s largest emitters where the most significant emissions reductions can occur quickly.

Road to the Green Light

Rigorous due diligence was critical before NZ Steel could embark on the journey to decarbonise its activities while maintaining onshore steel production.

The steps included a feasibility study on viability, risk, expected costs and various critical factors that may impact the project’s success, including scrap steel access, consenting processes, and sourcing necessary equipment within current cost estimates.

The deal was partly funded with up to $140 million (US$83 million) from the $650 million Government Investment in Decarbonising Industry (GIDI) Fund, which has a dedicated support programme for NZ’s largest emitters. Further, GIDI enables businesses of all sizes to reduce their emissions.

GIDI was first introduced in 2020 to accelerate the decarbonisation of NZ’s industrial process heat while stimulating the economic recovery post-pandemic to create and protect jobs.

The government said NZ has come “a long way” in the last three years since GIDI operates with “30 of the 81 process heat-focused projects complete or in commissioning.”

However, the opposition panned the project, with National Party leader Christopher Luxon saying the government “got it all wrong.”

Opposition Questions the Plan

Mr. Luxon said the project was “outrageous” despite condoning the company’s mission.

“We really applaud what NZ Steel is doing here. I’ve met with the CEO and the management teams and saw the site myself last year. I like the direction of where they’re going, but they are quite capable of stomaching and fronting up that $140 million themselves to get that transition away,” he said.

Mr. Luxon said the government’s budget couldn’t “find money” to help support New Zealanders going through a burdensome cost of living crisis.

“But all of a sudden, they (the government) can find $140 million as a subsidy paid for by Kiwi taxpayers and give it to a large foreign, multinational, profitable company,” he said.

Further, the party previously said in a media release that they supported the government’s emissions budgets and targets but was concerned their Emissions Reduction Plan is a poor use of taxpayers’ money.

NZ’s first Emission Reduction Plan was published on May 16. It contains strategies, policies, and actions for achieving emissions budget and contributing to global efforts to limit global temperature rise.

Mr. Luxon said, “we [the Nationals] support the goal of reducing emissions in the economy but need more evidence that this government will be able to deliver.”

Meanwhile, the NZ government noted they aim to deliver the most significant investment in tackling climate change in NZ’s history.

“NZ cannot afford to be left behind, economically or morally. Our future exports, our economy, our environment and the wellbeing of our nation depend on a credible plan to bend our emissions curve down to meet our targets,” the government said in a media statement.

However, Mr. Luxon said it came when “New Zealanders’ back pockets are hurting, and they want assurance their money is being carefully spent.”

He said emissions reduction will “only add to the perception that this government talks a big game but does not deliver—whether for the climate, housing, mental health, or anything else.”