Decarbonization pathways and mitigation potential assessment for the steel sector in Southeast Asia

Abstract

Southeast Asia’s steel sector faces the dual challenge of expanding production to meet rising demand while reducing carbon emissions. This study develops a bottom-up cost minimization model with 19 steelmaking technologies for six Southeast Asian countries over 2020–2070 and applies a three-dimensional scenario design that varies carbon pricing, technology cooperation, and infrastructure readiness at two levels each, yielding nine scenarios including a business-as-usual scenario (SC0). Rather than treating the three dimensions as strictly independent, we use the design to diagnose how they interact along a combined axis of policy ambition. Without climate policy, BF-BOF expansion locks in rising emission intensity, reaching 1.14 tCO 2/t by 2040, 18% above the 2020 level. Under the most favorable policy combination, emissions fall by 67% from SC0 by 2050. Carbon pricing contributes the largest emission reduction at 27.1 percentage points on average but raises costs. Infrastructure readiness adds 20.9 pp while simultaneously lowering costs. Technology cooperation adds 2.4 pp of emission reduction and delivers a 6 to 9% cost saving, and diversifies the technology mix during the transition. Deep decarbonization at 67% reduction is achieved at no higher per-ton cost than shallow decarbonization at 17% reduction when infrastructure and cooperation accompany carbon pricing, indicating that the perceived trade-off between emission ambition and cost is largely an artifact of incomplete policy packages. These findings suggest that Southeast Asian governments should prioritize hydrogen and electricity infrastructure investment before or alongside carbon pricing, and that regional cooperation frameworks can be used to accelerate technology transfer and reduce transition costs.