Cutting coal mine methane is a quick and affordable step for steelmakers to decarbonise value chains

Steelmakers operating blast furnaces should responsibly source from abated coal mines and effectively decarbonise their supply chains before 2030. This action must begin today, not tomorrow.

Recommendations

Reflect coal mine methane in steel emissions and set targets for 2030

Given the scale of coking coal use and the high warming potential of methane, coal mine methane should be appropriately reflected in the calculation of absolute emissions and emissions intensity for steel.

Include coal mine methane in policy instruments targeting steel

Standards, definitions, labelling schemes and procurement criteria can support the distinction between deep and incremental emissions reductions.

Multiple initiatives have emerged to define “low-carbon emissions steel” and set corresponding emissions thresholds. For instance, the EU Industrial Decarbonisation Accelerator Act is looking to develop a voluntary carbon intensity label for industrial products, starting with steel in 2025. 

Regulators, policymakers and standard-setters around the world should prioritise integrating coal mine methane emissions in accounting for steel emissions. Doing so would stimulate demand for green steel, while improving transparency and strengthening accountability for decarbonisation efforts. 

In the longer term, if methane is to be incorporated into carbon pricing mechanisms, directly measured data from coal mines and independent third-party verifications will be essential.

Steel companies are encouraged to set Scope 3 targets

Steelmakers should prioritise disclosing coal mine methane emissions under Scope 3 Category 1 as an immediate action, set ambitious reduction targets and avoid sourcing from unabated mines. This would support responsible procurement practices and improve availability of measured mine-level emissions data.

Over half of coal mine methane emissions can be avoided with existing technologies. As major buyers of coking coal, steelmakers share the responsibility for ensuring that their suppliers have proper methane monitoring, reporting and verification (MRV) systems in place. 

This would also help avoid future charges under methane import standards, like the one introduced by the EU, which will require coal suppliers to demonstrate compliance with the MRV standards, and ultimately, the specific emission thresholds. 

Additionally, steel and metallurgical coal mining companies are encouraged to participate in the Steel Methane Programme led by UNEP’s International Methane Emissions Observatory (IMEO). The Programme aims to define the “Gold Standard” for MRV and offers clear pathways for companies to transition from generic emissions estimates to precise, verified data that can inform ambitious mitigation targets and align methodologies across sectors. 

Financial institutions should be aware of risks associated with coal mine methane

Banks, insurers and investors should include coal mine methane when assessing the steel industry’s carbon footprint, and recognise full lifecycle emissions in corporate assessments of steelmakers. 

The recently launched SBTi’s Financial Institutions Net-Zero Standard suggests that, when setting alignment and sector-specific transition targets, financial institutions should include exploration, extraction and the development or expansion of mines for all metallurgical coal grades.  

The first Metallurgical Coal Exist List, published by Urgeward and NGO partners earlier this year, allows financial institutions to better understand coal exposure in their portfolios, and adopt more robust coal sector policies to contribute to the 1.5C climate goal.

UNEP’s IMEO is also working to improve coal mine methane emissions data availability by integrating top down and bottom up methods to support mitigation targets aligned with the Global Methane Pledge.

The ultimate goal is to break away from coal 

To meet net zero targets by 2050, the most effective strategy for addressing coal mine methane is to keep coal in the ground. No new coal mines or expansions are needed – in Australia or anywhere – in the IEA’s Net Zero scenario. Gassiest coal seams should be identified and left untouched, while super emitters should be either shut down or required to capture their methane emissions.

Policymakers should create the enabling environment for green steel

Policymakers and regulators should continue to support the steel industry by enabling greater scrap recycling, improving grid reliability and expanding renewable energy integration. These efforts are also critical for other energy-intensive sectors such as aluminium. 

On mitigating methane emissions associated with fossil fuel supply chains, the EU is leveraging import standards as policy tools. Policymakers in other countries are encouraged to consider such an approach and alignment in standards. 

Steelmakers need to shift to coal-free production

Steel producers should prioritise the transition to renewable electricity-based production as the core strategy for decarbonisation. This should also apply to steel producers which predominantly use scrap in electric arc furnaces, as they can further reduce lifecycle emissions by investing in or procuring renewable electricity. 

To ensure a breakaway from coal, iron and steelmakers should not build new blast furnaces. Where technologies such as CCUS and hydrogen injection are considered for reducing emissions from existing blast furnaces, steelmakers should also include – in their estimates of abatement potential and costs – fugitive methane emissions from upstream coal extraction and the measures to adequately address them. 

Financial Institutions should support the transition to clean steel

As the IFRS Sustainability Disclosure Standards (ISSB Standards) are increasingly adopted by jurisdictions around the world, financial institutions should be aware of and actively prepare for disclosure requirements of their financed emissions.

In particular, to manage and reduce their financed emissions, financial institutions should collaborate with steelmakers and explore opportunities to unlock upfront capital for green and low-emissions projects. 

Banks, insurers and investors should ensure that sustainable and transitional finance is available to support the shift from blast furnaces to green hydrogen-based iron production, and maximise recycling steel using renewable energy.