The steel sector stands at a critical juncture. As renewable energy infrastructure demand grows, the sector paradoxically becomes both a solution and a problem. Representing 8% of global energy system emissions from its direct operations, the steel value chain contains an overlooked threat to global climate commitments: methane from upstream metallurgical coal extraction.
Methane leakage from metallurgical coal production contributes an additional 27% to steel’s near-term climate footprint when measured using a 20-year warming potential (methane is 84 times more
powerful than CO2). This is equivalent to the emissions of Japan in 2023. While this neglected emissions source rivals the output of entire nations, it remains conspicuously absent from most decarbonisation strategies and risk assessments.
Traditional decarbonisation pathways that focus solely on blast furnace conversion and hydrogen-based production miss this critical upstream vulnerability. While a green steel transition is underway, this transition will take time, and metallurgical coal use will remain persistent for many years. For institutional investors, this presents a growing climate risk as methane measurement practices improve and regulators become increasingly aware of the comprehensive lifecycle emissions of steel production.
The path forward demands action. Methane’s shorter atmospheric lifetime means that reductions deliver immediate climate benefits — making this one of the most effective near-term interventions available.
The steel industry’s decarbonisation journey cannot succeed through green technology development alone. Instead, the steel sector must address its persistent dependence on metallurgical coal and subsequent methane emissions, which create systemic risks that extend far beyond traditional carbon accounting frameworks.
