Pioneering move by US steelmaker sets new direction for industry
As the world grapples with the urgent need to address climate change, sustainability leaders are emerging industry-by-industry. One such pioneer is US based Hybar, a newly formed company in the steel manufacturing sector. Hybar recently made headlines in climate, clean energy and iron steel media after funding its USD700 million project with the debt component of USD330 million achieving a global first of Certification under Climate Bonds Standard Steel Criteria.
Hybar's Vision: A Sustainable Steel Future
Hybar is on track to build and operate a state-of-the-art scrap metal recycling steel rebar production facility in Osceola, Arkansas. This facility is designed to produce an impressive 630,000 tons of rebar annually. Hybar is set to achieve a groundbreaking milestone in North America by utilising a direct connection to a nearby behind-the-meter solar installation to exclusively generate steel with 100% solar energy. By switching to clean energy, Hybar aims to keep its carbon emissions to a minimum, becoming a pioneer in low-carbon steel manufacturing.
For primary integrated steelmakers using existing blast furnace (BF) or electric arc (EAF) technology and newer direct reduced iron (DRI) producers through to multiple downstream rolling mills and processing plants, decarbonising energy supply is a vital part of emissions reduction for the global industry.
Steel Certified Climate Bonds
The issuance of USD 330 million Certified Climate Bonds by the Arkansas Development Finance Authority to fund the project marks a significant milestone in Hybar’s sustainability journey. This certification recognises Hybar's alignment with the targets of the international Paris Agreement and highlights the company's comprehensive efforts to reduce greenhouse gas emissions and environmental impact.
Kestrel, an independent external reviewer, provided the verifier's report to support the designation of the Certified Climate Bonds. This external validation further forges Hybar's commitment to transparency and accountability in its pursuit of sustainability.
Best Practice for Investors in Steel Transition
The steel industry has long been associated with high carbon emissions due to energy-intensive primary steel production processes. While policy regulations set the stage for a credible transition, the steel industry requires substantial investment for decarbonisation. Climate Bonds' Steel Criteria provide a framework for credible steel investments aligned with reaching net zero by 2050, laying out market best practice for investors to support an acceleration of capex in the industry to bring forward new plant and technology upgrades whilst decarbonising existing facilities.
Climate Bonds Certification provides investors and stakeholders with assurance that capex plans and new industry sector and plant investment is aligned with global climate targets. Introduced in December 2022, the Criteria lay out mitigation, adaptation, and resilience requirements, ensuring that financial instruments linked to eligible steel assets align with the Paris Agreement's goal of limiting global temperature rises well below 1.5oC above pre-industrial levels.
The Road to a Low-Carbon Industry
The steel industry faces a critical juncture. With existing blast furnaces reaching refurbishment/reline stage by 2030, and the remainder by 2040, accelerating investment in the primary stage as well as downstream is the sustainable path forward.
The policy paper included in Climate Bonds Steel Package provides valuable guidance to policymakers and regulators, showing how they can facilitate a climate-aligned pathway for the steel industry.
Investments in green technologies such as green hydrogen, renewable energy, and carbon capture and storage technologies offer immediate opportunities for emissions reduction. Governments can play a crucial role by incentivising low-carbon steel production through green public procurement and targeted R&D initiatives.
The Last Word: An Industry Milestone
The successful issuance of the Hybar Steel Project Certified Bond marks a historic moment for the steel industry. There’s more to come as policymakers, producers and investors grapple with industry transition in sectors like steel, cement and chemicals, and we continue the expansion of the Climate Bonds Standard and Certification options to support clean, green and climate investment.
Sean Kidney, CEO of Climate Bonds’ enthusiasm for the transaction is evident: "This significant achievement underscores the feasibility and credibility of low carbon pathways in the challenging steel manufacturing sector. Hybar's success sets an essential precedent for other companies in hard-to-abate sectors, demonstrating that sustainable practices are not only achievable but also economically viable.”
Monica Reid, chief executive officer and founder of Kestrel, shares this sentiment, adding: "Decarbonisation of this energy-intensive sector is essential to reaching net zero goals, and we are pleased to be able to use the Climate Bonds Certification to recognise Hybar's progressive approach to minimising emissions."
‘Till Next Time,