The Government has announced a support package worth £500 million to Tata Steel that would see its coal-fired blast furnace in Port Talbot replaced in a move towards producing more green steel.

However, the company cautioned that the plans will lead to consultations over a “deep potential restructuring” and as many as 3,000 workers are set to lose their jobs.

Ministers have said the support package would prevent even more job losses while energy analysts have said other decarbonisation routes are available that would be less impactful on workers.

The PA news agency looks into the details of how and why the Government is decarbonising steel and whether job losses are necessary.

– What is green steel?

Steel that is produced with power generated renewably. Currently, virgin steel is made using coal-fired blast furnaces which is a significant contributor of greenhouse gases.

There are four coal furnaces in the UK, two of which are owned by Tata, which make the steel industry responsible for 14.2% of the total manufacturing emissions in the UK and 95% of emissions from the UK’s steel sector.

– How can the steel industry decarbonise?

Producing virgin steel by using green hydrogen – which is made using renewable electricity – or producing recycled steel using an electric arc furnace would remove many of the current greenhouse gas emissions.

Carbon capture and storage is another option whereby CO2 would be caught at the factory before entering the atmosphere and stored underground.

– Why are there job losses?

The proposed agreement would see the Port Talbot plant change from producing virgin steel to recycled steel, which requires less workers.

Energy analysts said the upfront costs of changing to recycling rather than investing in hydrogen-powered virgin steel are cheaper.

Tata Steel’s plant does not earn enough to pay for decarbonising on its own and needs support from the Government, who have said the plant has been running at a loss for years.

– Why is the industry decarbonising?

To reduce the amount of greenhouse gases pumped into the atmosphere and stop the Earth heating up which would help to maintain a safe climate.

It is also a legal requirement to decarbonise under the Government’s net zero plan as well as in keeping with its international obligations under the Paris Agreement.

The Climate Change Committee has suggested the Government “set targets for ore-based steelmaking to reach near-zero emissions by 2035”.

All four coal furnaces are approaching the end of their lifespan and must be replaced. The Government said replacing all coal furnaces would reduce the UK’s carbon emissions by around 1.5%.

– How are other countries decarbonising steel?

There are are currently 38 green steel projects in progress across the EU, nine of which are in Germany.

No country is yet producing steel using green hydrogen though Germany has one plant using blue hydrogen, meaning the gas is made from fossil fuels.

The UK has one project in the pipeline on the Humber which would use blue hydrogen.

– Why produce virgin steel?

Aside from retaining more jobs, energy analysts say the Port Talbot plant should be converted to green hydrogen-produced virgin steel because there is a growing demand for it in cars, construction and other industries central to the modern economy.

In the drive to net zero, manufacturers are increasingly wanting to source materials produced without carbon emissions.

Switching away from fossil fuels could also lower production costs by untying from increasingly volatile international markets, energy experts said.