Australia: Go Green or Miss Business Opportunity

Steel and concrete production collectively contribute to a staggering 15 per cent of global greenhouse gas emissions, a figure considered alarmingly high due to the sheer scale and ubiquity of these materials in modern construction.

The construction industry’s significant environmental impact has spurred a shift towards low-carbon alternatives, driven by increasing awareness of climate change and stricter environmental regulations.

However, these eco-friendly options come with higher production costs, primarily due to the need for specialised equipment, alternative raw materials, and innovative technologies such as carbon capture and storage.

Renewable energy plays a crucial role in producing green steel and concrete, but it often comes with higher initial costs. For instance, green steel produced using hydrogen-based direct reduced iron and electric arc furnaces (H2-DRI-EAF) can incur a ‘green premium’ of around US$225 per tonne when hydrogen is priced at US$5/kg.

Similarly, low-carbon cement using carbon capture and storage technology can be 75 per cent more expensive than conventional cement. However, it’s important to note that these increased material costs typically result in only modest price increases for end products, with estimates suggesting just a 1 per cent increase in the total cost of a house or car.

Despite the increased expenses, major consumers in the construction sector, including real estate developers, builders, architects, and other stakeholders, are increasingly willing to pay a premium for sustainable steel and concrete.

This stems from a combination of factors, including corporate social responsibility commitments, regulatory compliance, and the growing demand from environmentally conscious end-users who prioritise sustainable buildings and infrastructure.

A major report released at Climate Week NYC by Climate Group and Ramboll reveals a significant shift in the global business landscape towards sustainable construction materials. The study, which surveyed over 250 companies across 42 countries and 21 industries, found that nearly half of the respondents are willing to pay a premium for lower-emission steel and concrete. This ultimately signals a robust demand for sustainable options in these carbon-intensive industries.

The report also highlights that 78 per cent of surveyed companies anticipate these sustainable materials will become standard within the next decade, indicating a growing recognition of the importance of reducing carbon emissions in construction.

Despite the positive outlook, several barriers to widespread adoption remain — including cost, industry conservatism, and lack of knowledge. To accelerate the transition, businesses are calling for decisive government intervention through financial incentives, carbon pricing mechanisms, and minimum product standards.

Ramboll Director for Energy-Intensive Industries Anna Ekdahl noted that lowering steel- and concrete-related emissions requires more than massive investments in new production facilities alone, instead, it will require a realignment of the entire sustainable energy ecosystem.

“Grid owners will have to take on a more active role than ever before — government will have to shape financial incentives, designers will have to come up with new solutions, producers will have to make bold business decisions, and end users may need to accept a price premium until the market matures,” said Ekdahl.

Not making this transition to low-carbon steel and concrete poses significant environmental risks. Continued reliance on traditional production methods for these materials heavily contributes to global greenhouse gas emissions, exacerbating climate change and its associated impacts.

This inaction perpetuates the cycle of environmental degradation, including rising sea levels, more frequent extreme weather events, and biodiversity loss.

Conversely, embracing low-carbon alternatives offers substantial environmental benefits. By adopting innovative technologies and processes, companies can dramatically reduce their carbon footprint, potentially cutting emissions by up to 70 per cent in cement production alone. This shift not only mitigates climate change but also promotes resource efficiency, reduces air and water pollution, and preserves natural habitats. Moreover, the switch to low-carbon materials can promote broader industry changes, inspiring further innovations and setting new standards for sustainable construction practices.

Ultimately, the move to low-carbon steel and concrete represents a crucial step towards a more sustainable and resilient future, aligning industrial practices with global environmental goals — like the Paris Agreement.

Companies in the building sector that fail to embrace green steel or concrete risk significant competitive disadvantages in an increasingly environmentally conscious market. As sustainability becomes a key driver of consumer and investor decisions, firms that lag behind in adopting eco- friendly materials may find themselves excluded from lucrative projects and partnerships.

Government regulations and building standards are evolving to prioritise low-carbon construction, potentially leaving non-compliant companies ineligible for contracts. Furthermore, institutional investors are increasingly focusing on reducing emissions in their portfolios, which could impact funding opportunities for companies resistant to change.

The growing prevalence of green steel offtake agreements, particularly in Europe, demonstrates a shift in market dynamics that forward-thinking companies are capitalising on.

As the demand for sustainable building materials rises, those who fail to adapt may face higher costs due to carbon pricing mechanisms like the EU’s Carbon Border Adjustment Mechanism, further eroding their market position.

Ultimately, the transition to green steel and concrete represents not just an environmental imperative, but a critical business opportunity that companies cannot afford to ignore.

The transition to low-carbon steel and concrete is a critical step in the construction industry’s efforts against climate change, driven by increasing regulatory pressures and consumer demand for sustainable materials.

Companies that embrace this shift will not only contribute to significant emissions reductions but also gain competitive advantages in an increasingly sustainability-focused market.

Source: Build Australia