Decarbonising the steel sector requires – besides new technologies, inputs and value chains – innovative, cooperative governance of world trade, key to which is embracing a multilateral system and reversing de-globalisation, says World Trade Organisation (WTO) deputy director-general Jean-Marie Paugam.

Uncoordinated climate policies could significantly hinder the future of green steel. With more than 70 carbon pricing approaches globally, this fragmentation exacerbates the risks of carbon leakage. While subsidies can accelerate the green transition and reduce carbon emissions, they also risk adversely affecting trade and smaller economies with less fiscal space, according to Paugam.

“We are closely monitoring export restrictions of rare earths, critical minerals, or recyclable materials like steel scrap, as these could slow down the global path toward decarbonisation. Regarding standards and regulations, we are observing the proliferation of incompatible emissions measurement methodologies, which could lead to trade disputes,” he told a conference in Jiangyin this week.

The WTO system can serve as a risk management and cost reduction tool, or “insurance policy”, for investors, Paugam continued. The first job of the WTO is to ease trade tensions in several ways. However, “we need to develop new modalities and platforms to improve coordination of the trade aspects of environmental policies and minimise trade strife,” he added.

China and the US are among those advocating for new lines of multilateral work on the interoperability of trade related climate measures. These efforts could help smooth out the differences between divergent climate policy mixes and foster recognition of equivalences. China and the US have also both called for a specific discussion at the WTO on decarbonisation standards in the steel sector, Kallanish notes.

WTO members are emphasising the importance of common emission measurement. This is a key enabler for both reducing trade frictions and providing certainty for decarbonisation investments, Paugam noted.

The WTO Secretariat and worldsteel have been convening multi-stakeholder discussions on the Steel Standards Principles for decarbonisation. The goal is to pre-empt the unnecessary proliferation of standards and encourage the convergence of methodologies.

“This is pioneering work marking a new approach through direct public-private partnership within a specific sector,” Paugam opined.

The WTO has identified four key areas where steel industry action is necessary. The organisation needs the industry to vocally support the multilateral trading system, especially at a time when tensions are multiplying. It should also encourage governments worldwide to come to the multilateral table and cooperate in making polices more interoperable.

The industry should support the convergence of evaluation methods underpinning the definition of green steel, as well as collaborate with Standards Setting Organisations and regulatory authorities to deliver these goals as soon as possible, Paugam concluded.