UK government to offer steel firms £600m to go green

23 January 2023

The UK government is set to provide British Steel and Tata Steel with £600 million in funding to help the two steelmakers switch from coal-fired blast furnaces and to help with their energy costs. The BBC reports that the funding is set to be announced by Chancellor Jeremy Hunt this week in a move which will protect thousands of jobs.

Port Talbot steel works - Image: Shutterstock

As part of the funding deal being offered by the Department for Business, Energy and Industrial Strategy (BEIS), the steelmakers will be required to move away from their blast furnaces which run on coking coal.

The BBC reports that a £300 million package for British Steel, which is owned by Chinese company Jingye, could prevent the closure of its steel works in Scunthorpe, Lincolnshire and save hundreds of jobs.

Indian-owned Tata Steel is also going to be offered a £300 million package, however it is unclear whether the funding will be enough for the steel giant to make the necessary changes at its plant in Port Talbot, the UK’s largest steelworks.

In August 2022, The Financial Times reported that Tata Steel threatened to shut down operations at Port Talbot if the UK government did not agree to £1.5 billion of subsidies to help it reduce carbon emissions. The report said that Tata has been in talks with the UK government about decarbonisation plans at the time, but discussions had stalled.

According to the BBC, the £300 million of funding being proposed to Tata may not be enough with the company estimating the cost of switching to “green steel-making” in Port Talbot at around £3 billion.

Tata produces around 3.6 million tonnes of steel a year in the UK and is responsible for around 2% of the UK’s carbon emissions. One way for steelmakers to go green is by using hydrogen instead of coal, however for this to happen there first needs to be significant investment in the UK’s hydrogen industry. An alternative is for British Steel and Tata to adopt electric arc furnaces which would be run using electricity provided by renewables.