German luxury carmaker Mercedes-Benz announced this week that it has taken an equity stake in Swedish start-up H2 Green Steel and will begin using green steel in the construction of its “various vehicle models as early as 2025.”
H2 Green Steel (H2GS) was founded in 2020 by a group of partners and investors including Swedish investment firm Vargas Holding, the founder and largest shareholder of H2GS and which is also the co-founder and one of the largest shareholders of Swedish battery developer and manufacturer Northvolt.
Planned to bring zero emission steel production to Europe, H2 Green Steel will be a fully integrated, digitalised, and automated greenfield steel plant and is expected to begin production in 2024. By 2030, H2 Green Steel expects to boast an annual production capacity of five million tonnes of high-quality steel.
It is unsurprising, then, that Mercedes-Benz, one of the world’s most recognisable vehicle manufacturers, has invested in H2GS as a means of introducing CO2-free steel into the series production of its vehicles.
Mercedes-Benz announced this week that, together with its steel suppliers, it is retooling its entire supply chain to focus on the prevention as well as reduction of CO2 emissions, rather than relying simply on compensation for CO2 emissions.
The investment in and partnership with HSGS is one step in this retooling, as well as another step towards Mercedes-Benz’s goal of achieving carbon neutrality by 2039.
“With an equity stake in H2 Green Steel, Mercedes-Benz is sending an important signal to accelerate change in the steel industry and increase the availability of carbon-free steel,” said Markus Schäfer, Member of the Board of Management of Daimler AG and Mercedes-Benz AG; responsible for Daimler Group Research and Mercedes-Benz Cars COO.
“As a first step, we are investing a single-digit million amount. As a preferred partner of the start-up, we will be launching green steel in various vehicle models as early as 2025.”
For example, according to Mercedes-Benz, one of its sedan vehicles is constructed from approximately 50% steel, which in turn accounts for around 30% of CO2 emissions in the vehicle’s production.
By switching to green, emissions-free steel, carmakers are presented with an opportunity to dramatically reduce greenhouse gas emissions in their production lines.
Numbers published by Mercedes-Benz claim that traditional steel production using a classic blast furnace emits an average of more than two tonnes of CO2 per tonne of steel.
Thus, not only does Mercedes-Benz ensure that its own value and supply chain reduces emissions, but its investment will incentivise other steel producers to begin making green steel, thus reducing overall emissions even further.
H2GS will use renewable energy sources and hydrogen instead of coking coal in steel production, with the hydrogen serving as a reduction gas, which releases and binds the oxygen from the iron ore and, instead of producing CO2 as a result, will produce water.
Mercedes-Benz is not the first European carmaker to announce green steel plans, after Swedish automotive giant Volvo Group announced in April its own plans to begin using green steel.
Volvo has promised to begin manufacturing the first concept vehicles and machines with fossil fuel-free steel from Nordic steel giant SSAB in 2021, and this will be followed by smaller-scale serial production in 2022, leading into gradual escalation towards mass production.
“We are determined to be a climate-neutral company by 2050 in line with the Paris Agreement,” said Martin Lundstedt, President and CEO at Volvo Group.
“This means that our vehicles and machines will be emission-free when in operation but also that we will review the materials, like steel, used in our products and will gradually switch to fossil-free alternatives here as well.
“This is an important step on the road to completely climate-neutral transports.”
SSAB followed in the footsteps of German industrial engineering and steel production giant Thyssenkrupp, which earlier in the year announced it would work with German energy company Steag to build a 500MW hydrogen electrolysis plant intended to power steel production.
Similarly, one of Mercedes-Benz’s chief rivals, BMW, announced in February that it would begin souring aluminium produced using power generated by the 1GW Mohammed bin Rashid Al Maktoum Solar Park in the United Arab Emirates.
The Dubai Electricity and Water Authority (DEWA) and Emirates Global Aluminium (EGA) announced back in mid-January that the Mohammed bin Rashid solar park had begun powering the production of aluminium, a world first and a significant milestone for the decarbonisation of the global manufacturing industry.
Joshua S. Hill is a Melbourne-based journalist who has been writing about climate change, clean technology, and electric vehicles for over 15 years. He has been reporting on electric vehicles and clean technologies for Renew Economy and The Driven since 2012. His preferred mode of transport is his feet.