Given these metrics, decision makers in both steel and construction need to take stock, consider their options, and plot a realistic path toward a lower climate impact. 3 A significant portion of steel consumption in building and construction is from “long” products, which-in the United States-are most commonly produced through electric arc furnaces (EAF) that have a lower CO 2 emissions intensity per metric ton of steel. Due to the energy required for its production, steel is a carbon mega-producer, accounting alone for around a quarter of emissions in the construction process. 2 “Steel facts,” World Steel Association, accessed January 26, 2022. One reason for the industry’s high emissions is that it is a voracious consumer of steel, accounting for more than 50 percent of global demand. A third of these are associated with materials and the construction process, or so-called “embodied carbon.” 1 “Metals & Mining Insights,” McKinsey, accessed in September 2021 “Real Estate Insights,” McKinsey, accessed in September 2021. Construction industry emissionsįrom houses to bridges, hospitals, and skyscrapers, the construction industry is responsible for approximately 25 percent of global greenhouse-gas emissions. A tricky calculation is required, but the prize is a chance to get ahead in a market that is set for a potentially rewarding future. They must also ensure that greener business models are aligned with demand that will rise at an uncertain pace over time. The key in that regard will be to establish market position, while adjusting to a new cost base. However, they can significantly reduce embodied carbon-in commercial buildings by as much as 70 percent by 2030.Īmid tight industry margins, a priority for decision makers will be to ensure that there is a solid business case for change. To be sure, new materials such as green steel are more expensive, and will therefore demand a new pricing model. Those that prepare astutely are likely to seek out emerging pockets of innovation and dial up investment in sustainable technologies and capabilities. The decisions made by construction executives now will determine how they are positioned for the transition over the coming decade. This report is a collaborative effort by Pedro Assunçāo, Brodie Boland, Trevor Burns, Emanuele D’Avolio, Alasdair Graham, Focko Imhorst, Ingrid Koester, Carl Kühl, Rory Sullivan, and Alex Ulanov, representing views from McKinsey’s Metals & Mining and Sustainability Practices and the Energy Transitions Commission.
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