Updated: Oct 27

The majority of items we use every day have one common material, Steel. It has been the foundation of the industrial economy and continues to be a key input in almost all construction, engineering, and manufactured goods. In recent times it has been oil and coal which have been under pressure to change, but as the climate crisis has now taken centre on the global stage, scrutiny of the steel industry is heating up.

Across the world, the dominant method in smelting iron injects vast quantities of carbon dioxide into the atmosphere. It is one of the main contributors of man-made global warming. There are two main factors that cause steel production to be highly emissions intensive. The power generation needed is immense, with an average of 770 kWh per tonne. Secondly, the sector is the largest industrial producer of carbon dioxide emissions and accounts for 7-9% of all direct emissions (which is larger than India).

The steel industry plays a pivotal part in achieving global climate and energy goals. Meeting these goals will require steel industry emissions to fall by at least half by 2050. Many of the largest steelmakers have announced targets to achieve “net zero” emissions. This will take not only switching to renewable resources but the implementation of turning conceptual processes into an industrial reality. The global trend to net zero emissions has seen deployment of renewable energy technology and the removal of some fossil fuels. However, emissions intense industries (steel, cement and petrochemicals) are now under the spotlight to decarbonise.

Difficulties Facing the Metals Industry

It is increasingly challenging overhauling an entire industry, especially one which has been using a similar smelting process for decades. Steel is already one of the most recycled materials and as we have established, simply reusing this material does not combat the scale of change required to meet a net zero target.

The production of steel is exceedingly carbon intensive due to the method of extracting iron from its ore. A process which involves large blast furnaces heated to over 1,000c and loaded with coke, lime and minerals. This removing the oxygen molecules from the iron oxide to create iron. As a result, it leaves behind a significant amount of CO2. A core material named coke, is the lowest cost energy carrier to catalyse the steelmaking process and therefore difficult to commercially substitute, and unfortunately it is carbon based.

Aside from the industry producing around 2 billion tonnes of CO2 annually. Being an immensely capital-intensive industry, the level of fresh investment could run into billions of dollars to shift to less carbon intensive processes. It is difficult given the constant volatility in oversupply and profitability in the sector. China’s pledge to be carbon neutral by 2060 will be a great challenge. As a source of half the global steel supply, the vast scale of China’s steel sector also equates for a third of the country’s industrial emissions. It is clear to see that major upgrades are required to reach its 2060 goal. The inefficiencies in the Chinese steel sector are already clear, given Chinese steel generates 2 tonnes of CO2 per tonne, which is double European steel’s 1 tonne of CO2 per tonne. These inefficiencies are common in steel production outside the more regulated and carbon focussed markets such as Europe.

Changes Today for Net Zero Metals

Electric Arc Furnaces (EAF) are not a new phenomenon and are utilised to melt down scrap metals. These are highly applicable due to the high levels of recycling in the steel industry. This saves the use of blast furnaces when recycling steel, so they can then mainly be used for new steel production. The use of EAF in simply melting scrap rather than smelting raw materials allows more flexible production with a fraction of the CO2 when compared to blast furnace production. Unfortunately, the quality of output of EAF does not always meet the required specification for certain uses (e.g. automotive). Currently EAF accounts for less than 30% of steel production globally, which is a noticeably lower capacity than the recycling rate of steel. Increasing the application of EAF would go some way in abolishing the sectors emissions intensity.

The cost and application of renewable energy solutions has been a strong driver behind lowering the emissions intensity in metals production. Across the value chain the use of renewables can offer a reduction emissions from electricity consumption and significant cost savings. The benefit of renewable technologies is the ability to scale the application to be used for powering a small single furnace to significantly large steel production facilities.

An example of this is the launch of the $285m Bighorn Solar array in Colorado. With 750,000 panels powering the 90% of the energy required by the steel mill, including the Electric Arc Furnace that melts more than 1 million tonnes of scrap metal per year. The production facility faced increased cost pressures but as a result of securing the low cost of electricity at $0.03/kWh for 20 years, the plants economic viability was reinvigorated. This is a strong example of the green transition achieving both increased economic benefits (saving 1,000 jobs and adding 300 more with the plants planned expansion) and moving towards a net zero metals production target.

The use of hydrogen as a reagent in place of coal to reduce iron ore to pig iron, eliminates the CO2 emissions from the same process used in a blast furnace. The process however also must include a EAF to reduce the iron for further processing. The conundrum is the electricity required to reduce the iron ore, which is equal to 2.6 MWh compared to coal reduction which requires 0.8 MWh per tonne. Subsequently comparing the production using both methods, the electricity demanded by the hydrogen process creates similar CO2 emissions as a traditional blast furnace. A further hurdle is that the hydrogen reduction method has a cost 20-30% higher than the conventional method. However, when solar PV or wind can be applied to conduct the electrolysis required for hydrogen production, this would negate the emissions intensity of hydrogen reduced iron.

Upcoming Technology for Commercialisation

Molten Oxide Electrolysis (MOE) takes metals in its raw oxide form and transforms this into molten metal products. Electrons are used to melt the inputs and selectively reduce the target oxide. The purified metal collects at the bottom of a cell and is tapped by drilling into the cell using a process adapted from a blast furnace. The tap hole is plugged and the process then continues. It is likely to be largely scalable across multiple alloys, allowing for increased production capacity. Boston Metal’s hope by 2025 the technology can be commercialised.

Heliogen is a small clean-energy company in California. It has developed an array of solar mirrors capable of concentrating sunlight in order to build enough heat to reach temperatures exceeding 1,000c. The technology has the potential to be integrated into industrial processes like Steel/Cement production. If this is possible the solar thermal technology might help reduce emissions intensity from processes requiring immense industrial scale heat.

Thermal Energy Storage has also emerged as a new way to provide low-cost energy storage on combined heat & power (CHP) principles, and help in decarbonising the production of the steel value chain. There are a handful of thermal storage players, all with their own technology and preferred applications. However nearly all of them fail in storing heat at very high temperature for a long period of time (hence it is a valuable application for steel or chemical industries in using carbon free heat). Berlin-based Lumenion GmbH is one of the few players able to decarbonise heat and power across most industries (including steel and steel manufacturing). Lumenion created a unique technology with the ability to store heat up to 650c and therefore provide energy output as either heat or electricity. The technology developed by Lumenion is an alternative to battery storage and has other industrial purposes given its ability to store carbon free heat. It is being explored whether the Thermal Energy Storage technology can be used in tandem with an EAF in an effort to achieve peak heat for processing metals.

Closing Remarks

Climate change continues to rise to the top of the global political agenda, with many governments committing to ambitious environmental targets. There is a race against time to develop low-carbon versions of this strong and versatile material which accounts for up to 9% of global emissions. Achievement of this will take Market Intervention, such as differentiated products (e.g. low-carbon steel markets); Policy Intervention, such as support and penalisation mechanisms (e.g. Carbon Trading Schemes); and Financial Intervention, such as investor pressures and R&D support.

As laid out in this article there is much hope for such change in the steel industry, if supported with appropriate funding and policy. It is vital for new technologies to attract backing in their path to being commercially viable, and it is for both private and public stakeholders to act in looking to achieve a net zero metals industry.

Sources and Further Reading










Mobile internet connectivity brings a wide range of social and economic benefits, helping to promote digital inclusion and supporting the delivery of essential services and key development objectives such as poverty eradication, healthcare, education, financial services, and gender equality. In a world emerging from the COVID pandemic, there has never been a deeper reliance on connectivity and software solutions to maintain, and advance productivity. Although, the world has adapted and overcome the challenges of remote working and living, our reliance on the internet, and by extension the infrastructure that supports it has been cast into sharper focus than ever before.

In the years leading up to the Pandemic, and indeed since the introduction of broadband connectivity in the early 2000’s the growth in communications, transactions and information transfer has grown exponentially – this has led to vast sums of money being invested into the foundations of the internet, which are split into two distinct parts:

  1. Physical communications infrastructure, ranging from Tower’co’s, Satellite communications, Fibre Networks, Undersea cables, Data centres and more. Today sufficient investment has allowed anyone in the developed world to have access to reasonable fixed line broadband speeds, and high-speed cellular connectivity.

  2. Software, applications, and consumer hardware that allows us to interact with business, friends, and family. There is seemingly no limit to the creativity of entrepreneurs, and likely infinite new use cases to be generated from 5G and even greater processing power of mobile handsets. Venture capital and public markets continue to avail significant sums in supporting these endeavours in our new hyper-connected world.

The benefits, both social and economic around connectivity, and for the scope of this article, the productivity gains delivered by new software and hardware start-ups taking advantage of high-speed connectivity are obvious. Therefore, the is no doubt that sufficient capital will continue to find its way into new and exciting infrastructure projects to improve connectivity in parts of the world that are already connected. However, we must not fail to neglect the fact that a huge percentage of the world remains unconnected, and a very large portion of the connected Populus in the developing world are still grappling with Packet Data or very slow data connections – the true population of individuals without access to high-speed data is staggering. GSMA estimates that globally 3.3bn people are covered by cellular services and not connected to mobile broadband, but a staggering 0.7bn people are not covered at all.

Pockets of liquidity dedicated to addressing these needs (except for development financiers or grants) is limited, however the scope of the opportunity is huge. Many unconnected individuals are cash-poor, and many don’t have access to hardware (phones and computers) capable of utilising this new connectivity, but hardware costs are falling, and demands are rising, those who enter this (somewhat) untapped market first will benefit from limited competition, and, in a world where data is a lucrative commodity – access to a brand new demographic of consumers.

Characteristics of core digital infrastructure investments

Fibre-Optic Networks

Cables, transmitting light pulses (not electricity) that carry data between offices, data centres, mobile towers, countries, and homes.

Backbone Network:

  • Under-sea: Primarily for connections of countries that are divided by bodies of water, cables physically run along ocean beds

  • Long-Haul: Primarily for connections between population centres, over land

Last Mile:

  • FTTX (Fibre to the “x”) for direct fibre connectivity to homes, offices, and mobile towers.


  • Long payback period – up to 20 years due to high construction costs but with very long assets life 20yr+ allowing equity investors to realise material upside on assets once bank debt and project finance has been repaid


  • Asset life: although as mentioned above, asset life is long, and fibre optic cables are typically more reliable than copper costly maintenance can be required

  • Technological Obsolescence: One of the key risks with fibre networks (this mostly applies to FTTH and metro networks) is the risk of displacement by another technology – for Fibre the most viable alternative is FWA (fixed wireless access) over 5G which can offer substantial improvements over copper connections with much lower deployment costs. However, fixed line fibre will typically be preferred for most urban connections due to stability, superior latency characteristics and lack of wireless interference risk.

  • Ownership and Rights of Use: Its important to review a fibre network’s access to termination and interconnection access points, thus being careful to assess the risk of reliance on 3rd parties for parts of some fibre networks that are not fully on-net.

  • Overbuild risk: this is a significant risk particularly in FTTX networks where multiple providers are installing the same capacity in the same areas. This is less of a risk in rural areas where cost per home pass is typically higher.

Data Centres

Data centres are highly specific, purpose-built buildings with very specific requirements. These buildings house and maintain the computer systems, and storage devices and other telecommunications infrastructure that allow modern communication to function.

Data centres, unlike traditional real estate are typically measured in size by using Megawatts instead of traditional metrics such as ‘sqft’. Additionally, unlike traditional real estate, seemingly small factors play very large roles in determining asset valuation – including, access to power supply, reliability, and redundancy of power supply, outside temperature, connection to fibre optic lines, proximity other internet exchanges or key locations such as stock exchanges amongst others.

Characteristics of cloud data centres

  • The asset class benefits from strong, stable cash flows from highly bankable tenants. Even with short term contracts, relocation is sometimes prohibitively expensive hence co-location facilities usually benefit from long term contracted cash flows

  • Returns are attractive, with PGIM estimating average global yield to be around 6-11% with REIT’s focusing on data centres outperforming all other types of REIT in 2020. Examples of US REITS are Equinix, Digital Realty and Cyrusone all enjoying low single digit dividend yields at the time of writing.

Edge Data Centres:

  • Edge data centres are small facility located towards the edge of a network. Facilities contain broadly the same hardware as their larger counterparts but cover a smaller footprint and are located closer to end user devices.

  • The market for edge data centres is expected to increase nearly three-fold by 2024 to USD13.5bn from just 4bn in 2017 (PWC) – themes driving this growth include:

  • Content Delivery - Hosting of Netflix content near your home to speed up buffering time.

  • Arrival of 5g

  • IOT – low latency processing for manufacturing and smart cities applications

  • Financial Services – High performance analysis and trading algorithms where speed is of paramount importance

Back to emerging markets… how can investors support Africa’s connectivity goals.

Despite lagging the world in terms of connectivity, most of Africa’s digital development is now accelerating, catalysed by the Pandemic there is a paradoxical opportunity to rebuild much of the economy with a focus on Digital. Start-ups and corporates continue to develop innovative web and mobile based applications and dynamic new business models. If investment in closing the digital divide can also accelerate there is a unique, exciting opportunity to capitalise on COVID’s negative impacts and revamp the delivery of life-transforming services such as health, education, financial services and more. Venture Capital and the private space should support these businesses and provide funding directly to local founders and entrepreneurs, with first-hand experience of the issues they are addressing.

Potential applications and solutions:

Deploying infrastructure in remote areas is only partially a technical problem, but more-so a challenge of ensuring connectivity in areas with spare populations and lower revenue opportunities is delivered with long term commercial sustainability. I am of the belief that connecting the next billion people will come through a combination of falling costs and clever deployments/optimisations of current technologies ( that allow small cell’s to be deployed in rural locations, but also through the utilisation of entirely new types of technology.

Since the late 90’s boom in satellite connectivity, the world has come a long way. Orbital lunch costs have plummeted, and hardware has become orders of magnitude cheaper. There are several competing traditional low earth orbit systems in place and planned for the near future, but also an entirely new class of satellite technology that allows vehicles in orbit to communicate directly with end user devices – no satellite dish required. Companies like Swarm Technologies and AST space mobile offer incredible applications for rural connectivity and IOT devices, thus I end on the note that perhaps, in a far flung future hyper-rural connectivity may not rely on mobile towers at all.

In conclusion, Investors have an opportunity to move quickly into Africa’s digital infrastructure needs. There is dire need for both Physical Infrastructure (Project Finance and traditional Debt/Equity) and Soft Infrastructure (Start-ups and software businesses via equity and convertible debt). The COVID crisis has re-enforced the importance of our new connected world and provided an opportunity for investors to sling shot many emerging markets into the digital age.

Whilst this is an incredibly complex topic and requires engagement and action from multiple stakeholders, in this blog, we discuss at a high-level the CO2 emissions linked to production, consumption, trade and how the greater (albeit justified) focus on emissions may be penal for developing countries, as much of the emissions produced in developing countries are linked to export flow to developed markets.

Who has contributed most to emissions?

Since 1751 the world has emitted over 1.5 trillion tonnes of CO2. To reach our climate goal of limiting average temperature rise to 2°C, the world needs to urgently reduce emissions. One common argument is that those countries which have added most to the CO2 in our atmosphere – contributing most to the problem today – should take on the greatest responsibility in tackling it.

There are some key points we can note from this perspective:

  • The United States has emitted more CO2 than any other country to date: at around 400 billion tonnes since 1751, it is responsible for 25% of historical emissions;

  • This is twice more than China – the world’s second largest national contributor;

  • The 28 countries of the European Union (EU-28) – which are grouped together here as they typically negotiate and set targets on a collaborative basis – is also a large historical contributor at 22%;

  • Many of the large annual emitters today – such as India and Brazil – are not large contributors in a historical context;

  • Africa’s regional contribution – relative to its population size – has been very small. This is the result of very low per capita emissions – both historically and currently.

Through the unchecked utilisation fossil fuels and industrial revolutions todays developed markets got to where they are today. These countries now have the technology and financial capabilities to help fast-track the energy transition in developing markets and share best practices learned over time and through R&D to optimise CO2 emissions as they go on their growth journeys as well as produce goods consumed in developed markets.

On a production basis, Asia is by far the largest emitter, accounting for 53% of global emissions. As it is home to 60% of the world’s population this means that per capita emissions in Asia are slightly lower than the world average – however this population has increasing wealth and demands on resources.

We have seen action being taken to help tackle this, for example, The Association of European Development Finance Institutions (EDFI), which has a combined US$50 billion under management in emerging and frontier markets, have been strong proponents of sustainable and responsible investing across sectors since their inception, however, to help further fast-track the change that is required to avoid the impending climate crisis, greater tempo and more stakeholders need to act, particularly private sector investors.

Whilst emissions can be optimised via such support, one of the key aspects that needs to be addressed is the inequality in emissions production and consumption, and a greater emphasis put on “reduce & replace” measures.

Global inequalities by production

There are two parameters that determine our collective CO2 emissions: the number of people, and quantity emitted per person. We either talk about total annual or per capita emissions. They tell very different stories, and this often results in confrontation over who can really make an impact: rich countries with high per capita emissions, or those with a large population.

Emissions by country’s income

  • When aggregated in terms of income, we can see that the richest half (high and upper-middle income countries) emit 86% of global CO2 emissions. The bottom half (low and lower-middle income) only 14%. The very poorest countries (home to 9% of the global population) are responsible for just 0.5%. This provides a strong indication of the relative sensitivity of global emissions to income versus population. Even several billion additional people in low-income countries — where fertility rates and population growth are already highest — would leave global emissions almost unchanged. 3 or 4 billion low-income individuals would only account for a few percent of global CO2. At the other end of the distribution however, adding only one billion high income individuals would increase global emissions by almost one-third.

Emissions by world region

  • When aggregated by region we see that North America, Oceania, Europe, and Latin America have disproportionately high emissions relative to their population. North America is home to only 5% of the world population but emits nearly 18% of CO2 (almost four times as much). Asia and Africa are underrepresented in emissions. Asia is home to 60% of the population but emits just 49%; Africa has 16% of the population but emits just 4% of CO2. This is reflected in per capita emissions; the average North American is more than 17 times higher than the average African.

This inequality in global emissions lies at the heart of why international agreement on climate change has (and continues to be) so contentious. The richest countries of the world are home to half of the world population and emit 86% of CO2 emissions. We want global incomes and living standards — especially of those in the poorest half — to rise. To do so whilst limiting climate change, it’s clear that we must shrink the emissions of high-income lifestyles. Finding the compatible pathway for levelling this inequality is one of the greatest challenges of this century.

Global inequalities by consumption

The initial comparison of emissions by income group and region was based on ‘territorial’ emissions (those emitted within a country’s borders) — these are termed ‘production-based’ and are the metrics by which emissions are commonly reported. However, these emissions do not account for traded goods (for which CO2 was emitted for their production). If a country is a large importer of goods, its production-based emissions would underestimate the emissions required to support its standard of living. Conversely, if a country is a large goods exporter, it includes emissions within its accounts which are ultimately exported for use or consumption elsewhere.

How do consumption-based emissions change the emission shares by income group and region?

On a production basis we had previously found that the richest (high and upper-middle income) countries in the world accounted for half of the population but 86% of emissions. On a consumption basis we find the same result but resulting from the fact that upper-middle income countries primarily export emissions to high income countries. High income countries’ collective emissions increase from 39 to 46% when adjusted for trade (with only 16% of the population); upper-middle income countries’ emissions decrease by the same amount (7% points) from 48 to 41%. Overall, this balances out in the top half of the world population: upper-middle income countries are net exporters whilst high income net importers.

In the bottom half, it appears that very little changes for the collective of lower-middle- and low-income countries: their production and consumption emissions shares are effectively the same.

By region we see that traded emissions tend to flow from Asia to North America and Europe (Asia’s share reduces when adjusted for trade whilst North America and Europe’s share increases).

Note here that consumption-based emissions are not available for all countries. Collectively, countries without consumption-based estimates due to poor data availability account for approximately 3% of global emissions. Many of the missing countries are at low and lower-middle incomes. With the addition of these countries, we would expect small percentage point shifts across the distribution. The challenges in accounting for carbon embedded in global trade mean these estimates are not perfect; nonetheless they should provide a good approximation of the global transfers across the world.

On a consumption basis, high-income countries (Europe and North America in particular) account for an even larger share of global emissions (46% — nearly three times their population share of 16%).

Which countries in the world are net importers of emissions and which are net exporters?

To give a perspective on the importance of trade these emissions are put in relation to the country’s domestic, production-based emissions.

Countries shown in red are net importers of emissions – they import more CO2 embedded in goods than they export. For example, the USA has a value of 7.7% meaning its net import of CO2 is equivalent to 7.7% of its domestic emissions. This means emissions calculated on the basis of ‘consumption’ are 7.7% higher than their emissions based on production.

Countries shown in blue are net exporters of emissions – they export more CO2 embedded in goods than they import. For example, China’s value of -14% means its net export of CO2 is equivalent to 14% of its domestic emissions. The consumption-based emissions of China are 14% lower than their production-based emissions.

We see quite a regional East-West split in net exporters and importers: most of Western Europe, the Americas, and many African countries are net importers of emissions whilst most of Eastern Europe and Asia are net exporters.

We see that the consumption-based emissions of the US are higher than production: In 2016 the two values were 5.7 billion versus 5.3 billion tonnes – a difference of 8%. This tells us that more CO2 is emitted in the production of the goods that Americans import than in those products Americans export.

The opposite is true for China: its consumption-based emissions are 14% lower than its production-based emissions. On a per capita basis, the respective measures are 6.9 and 6.2 tonnes per person in 2016. A difference, but smaller than what many expect.

Whilst China is a large CO2 emissions exporter, it is no longer a large emitter because it produces goods for the rest of the world. This was the case in the past, but today, even adjusted for trade, China now has a per capita footprint higher than the global average (which is 4.8 tonnes per capita in 2017).

These comparisons provide an answer to the question whether countries have only achieved emissions reductions by offshoring emissions intensive production to other countries. If only production-based emissions were falling whilst consumption-based emissions were rising, this would suggest it was ‘offshoring’ emissions elsewhere. There are some countries where this is the case. Examples where production-based emissions have stagnated whilst consumption-based CO2 steadily increased include Ireland in the early 2000s; Norway in the late 1990s and early 2000s; and Switzerland since 1990.

On the other hand, there are several very rich countries where both production- and consumption-based emissions have declined. This has been true, among others, for the UK, France, Germany, and the USA. These countries have achieved some genuine reductions without outsourcing the emissions to other countries. Emissions are still too high in all these countries, but it shows that genuine reductions are possible.

In most countries emissions increased when countries become richer, but this is also not necessarily the case: by comparing the change in consumption-based emissions and economic growth we see that many countries have become much richer while achieving a reduction of emissions.

Net Zero

Net zero emission means that all man-​made greenhouse gas emissions must be removed from the atmosphere through reduction measures, thus reducing the Earth's net climate balance, after removal via natural and artificial sink, to zero.

This concept has grown in popularity, with many developed market firms setting net zero targets, with netting achieved primarily via the purchase of carbon offsets. Whilst this goes a long way in supporting emissions targets, this is only part of what is required. Greater emphasis needs to be placed on the reduction and replacement of emissions.

How can developed markets help to balance carbon inequality?

Consumption-based emissions reflect the consumption and lifestyle choices of a country’s citizens, this is what drives a significant portion of emissions generated in developing markets as we have seen above. Accordingly, these countries citizens have great influence to help address the emissions output globally. Some of the many practical ways this can be achieved is via:

  • Calculating one’s personal footprint – you may be surprised with the results!

  • Conscious consumption choices – for example, there is considerable evidence that reducing the consumption of meat has significant environmental benefits

  • Focusing on reusing or recycling goods rather than discarding

  • Replacing high emissions activities with lower – e.g. can one walk or cycle to work vs. drive?

  • Championing reduction and replacement activities with their employers

  • Actively lobbying investment firms who manage their capital (e.g. savings, pensions etc.) to adapt their investment strategies to directing capital to “greener” investments (in both developed and emerging markets) and provider greater transparency of their activities

  • Whilst individually, our savings might be small, collectively we can make a change.

For example, at Qbera Capital, we so far this year, we have conducted a detailed review of our emissions footprint, as well as identified reduction and replacement actions that are now being implemented. To learn more about what we are doing, feel free to contact us.