U.S. Steel Is Trying Carbon Capture. Experts Aren’t Impressed.

Last week, the Department of Energy announced $6 billion in awards to help clean up some of the most greenhouse gas-intensive industries in the U.S., including $1.5 billion to transform iron and steel manufacturing. U.S. Steel, one of the biggest American steelmakers, was not among the recipients.

On Wednesday, U.S. Steel made an announcement of its own: It is signing a 20-year agreement with CarbonFree, a Texas-based company, to capture carbon dioxide from Gary Works, the largest integrated steel mill in the country, and turn it into a marketable product. The $150 million project is the first to capture and utilize carbon from an American steel plant at a commercial scale.

Gary Works releases an ungodly amount of carbon into the air each year — more than the entire state of Vermont. CarbonFree will use its technology, known as SkyCycle, to collect 50,000 tons of CO2 from the plant per year and transform it into high grade calcium carbonate, a valuable ingredient for the food, pharmaceuticals, paint, and plastics industries.

Something certainly has to change if U.S. Steel is going to make good on its pledge of achieving net-zero emissions by 2050, let alone stay competitive in a market that’s expected to increasingly look for greener products. It’s unclear, however, whom the company is going to convince with this project, which will capture less than 1% of the plant’s annual emissions.

“It’s deeply unserious, I think, is the words that come to mind,” Hilary Lewis, the steel director at Industrious Labs, a nonprofit that advocates for decarbonizing heavy industry, told me. The effort is especially embarrassing, she said, given that two of the company’s competitors, SSAB and Cleveland Cliffs, were awarded $500 million each by the DOE for far more transformative green steel projects. “This announcement is emblematic of how U.S. Steel is a laggard.”

U.S. Steel declined to make any of its executives available to interview for this story. In response to my request for comment, the company provided a statement that said this was a first of its kind opportunity to “significantly reduce” emissions at Gary Works, and that it was “the first step in exploring the scalability of this technology” to support the company’s goals.

CarbonFree executives, too, asserted that the Gary Works project is a stepping stone to something bigger. But outside experts I spoke with were skeptical that it would be able to scale enough to make a meaningful difference in the plant’s — or the industry’s — emissions.

The steel industry contributes about 8% of global energy-related emissions. Though the U.S. is not one of the worst offenders (we actually make some of the cleanest steel in the world) U.S. steelmakers still have a long, expensive journey ahead to decarbonize.

That’s because there are eight steel plants in the U.S. that still use blast furnaces, a dirty, coal-intensive production method. Gary Works is one of them. Though these plants only represent about 30% of the country’s steel production, they are responsible for nearly 70% of the sector’s emissions, according to the Department of Energy.

The advantage of the SkyCycle project is that it doesn’t require U.S. Steel to do very much. “We build, own, and operate the [carbon capture equipment], and we’re able to get a return based on the chemicals we sell,” Martin Keighley, the CEO of CarbonFree, told me. “So it’s a much more attractive proposition for, in this case, U.S. Steel, because they don't have to invest large amounts of money into the plant.” More attractive than at least one alternative, that is, which is to capture the carbon and sequester it underground.

It’s a compelling argument. Carbon capture and storage adds big costs — to install the equipment, transport the CO2, and pump it into the bedrock — with no financial benefit to manufacturers. While the federal government does encourage carbon capture by offering an $85 federal tax credit for every ton of CO2 captured and stored, no law compels steel companies to do so. In many cases, the subsidy may not be not enough to get investors on board for a project, especially since tax credits can come and go depending on the whims of Congress.

But if you find someone else who can take your carbon and make money off of it, then what have you got to lose? Keighley said CarbonFree will be able to earn a slightly smaller federal tax credit — $60 — for every ton of carbon it turns into calcium carbonate, but that the company’s business model doesn’t depend on that.

“You know, we all look at 2050 and net zero, but it doesn't stop there. To be net zero, we’re still emitting CO2, so we still have to capture it,” he said, referring to the idea that the “net” in net zero implies there will continue to be emissions that must be neutralized. “We're going to be capturing forever. So, therefore, we need sustainable business models that aren’t reliant on government sources.”

One advantage of SkyCycle over other carbon capture technologies is that it works with raw, dirty flue gas, which might have all kinds of other gases and chemicals mixed in with the CO2. The gas is channeled through a series of chemical reactions and eventually reacts with calcium, a mineral that’s notoriously thirsty for CO2, to create calcium carbonate. Once it binds with calcium, the CO2 is essentially locked up permanently. It would take either very high heat or a very strong acid to remove it.

Keighley said the high grade calcium carbonate on the market today has much greater emissions associated with its production than CarbonFree’s process, and is about the same price. That creates a “multiplier effect,” he told me. Not only is the company reducing emissions from the Gary Works plant, it’s also reducing emissions associated with the products that incorporate the cleaner calcium carbonate. On top of that, the company is sourcing its calcium from steel slag, a waste product from the steelmaking process that nobody has really figured out what to do with. (This is different from blast furnace slag, which is valuable for decarbonizing the cement industry as a replacement for carbon-intensive “clinker.”)

So far, so good. But the issue, according to Rebecca Dell, a former Department of Energy analyst and senior director of industry at the ClimateWorks Foundation, is that the market for high grade calcium carbonate is tiny. “You’re gonna saturate these high end markets way before you get anywhere close to absorbing the full 8 or 9 million tons a year of CO2 that just the Gary Works is emitting,” she told me.

When I raised this with Keighley, he acknowledged that the market was limited. But he said the market for calcium carbonate in general, not just the high purity stuff, is much bigger, and that the company could move into other segments later. CarbonFree is already working on its next system, which will be capable of capturing 250,000 tons of CO2 per year. Calcium carbonate is essentially limestone, which is an abundant and cheap material, so it might be hard to compete in lower-grade markets without bringing down production costs. But Keighley mentioned another plan. “The beauty is, if and when you run out of market altogether, you store it,” he told me. In other words, the company could just stash the calcium carbonate on the grounds of the Gary Works plant. That assumes, however, that they’ve brought down their costs enough to make a profit off the federal tax credit for carbon storage — and that assumes the tax credit still exists.

Lewis, of Industrious Labs, raised a different issue. “If you’re choosing to invest in carbon capture, you're locking in that reliance on coal for another 15, 20 years,” she told me. Carbon capture doesn’t address the other health-harming pollutants these steel mills rain over their surrounding community, including nitrous oxides, sulfur dioxide, and soot. She also noted that the biggest consumer of the types of steel produced by blast furnaces, the auto industry, has ambitious climate targets. While automakers have yet to make truly market-transforming commitments to buy cleaner steel, if and when they do, Gary Works could be left unprepared, threatening the job security of its more than 4,000 workers.

U.S. Steel’s plan is a stark contrast to one of the projects awarded funding by the DOE last week, Lewis said. Cleveland Cliffs, which owns five of the remaining seven blast furnace steel mills, will get $500 million to replace one of its blast furnaces at a mill in Ohio with what’s called a “direct reduced iron” plant. Direct reduction is more efficient, cleaner, and cheaper than a blast furnace; the company said it would save $150 per ton of steel produced by making the switch. Though some direct reduction plants rely on natural gas, and therefore aren’t exactly carbon-free, the process can also be done with green hydrogen. That’s what a second project announced last week, led by the Swedish steelmaker SSAB, will be using at a new plant in Mississippi.

In my interview with Keighley, I asked what he thought about the criticism that this project would keep Gary Works hooked on coal for another 20 years, and that advocates wanted to see the plant transition to direct reduction. He responded by raising questions about green hydrogen. Producing green hydrogen requires lots of renewable energy, he said. Is that the best use of that renewable energy, or could you “get more decarbonization for your buck” by using it for something else?

Later, in an email, Keighley also pointed to SkyCycle’s readiness for deployment compared to the long development timelines for other solutions. Construction is expected to start as early as summer 2024, with operations beginning in 2026. He also emphasized that CarbonFree would be able to “easily” increase the size of the plant. “There’s so many different options and everyone’s trying to second guess everybody else. Just get on with doing something, you know?”

But Chris Bataille, a research fellow at the Columbia University Center on Global Energy Policy who focuses on pathways to net-zero for heavy industry, told me the tiny scope of this project is indicative of a larger issue. “These marginal changes are attractive to people who are just used to running a blast furnace their whole careers,” he said. “You can keep the rest of your plant, but that piece of equipment needs to change.”