Biden faces more pressure from environmentalists to block the steel merger

President Biden is facing new pressure to block Nippon Steel's takeover of iconic manufacturer US Steel, this time from environmental groups who say the partnership would thwart US efforts to curb climate change.

In interviews, environmentalists working to reduce greenhouse gas emissions say the merger would bring together two steel giants that are lagging behind in the transition away from fossil fuels.

Researchers at Industrious Labs, a nonprofit organization dedicated to decarbonizing steel and other heavy industries, have calculated, based on both companies' public disclosures, that Nippon and US Steel emit relatively high heat-trapping gases from steel production. Both companies are heavily dependent on coal-fired blast furnaces and are slower to transition to cleaner fuels than some international competitors. Three US steel mills – in Pennsylvania, Indiana and Illinois – combine to emit more greenhouse gases than a comparable number of coal-fired power stations in a year, the researchers estimate.

Nippon and US Steel officials say they are pursuing multiple strategies to decarbonize by 2050, including producing high-quality steel in more efficient electric-powered furnaces and using hydrogen injection technology in blast furnaces, and that their merger will advance these efforts.

In a joint statement on Thursday, the companies said the deal would “create a stronger, more competitive global company” and that Nippon and US Steel “recognize that solving sustainability challenges is a fundamental pillar of the existence and growth of a steelmaker .”

Concerns about the climate implications of the deal are adding to the growing political backlash over the proposed acquisition. A bipartisan group of senators, including Republicans Josh Hawley of Missouri and Marco Rubio of Florida and Democrats Sherrod Brown of Ohio and Bob Casey of Pennsylvania, have urged the administration to closely investigate and stop the takeover.

Lawmakers point to potential harm to American workers and the nation's defense industrial base if Nippon were to close some of US Steel's U.S. plants. The company says it has no plans to do so. The United Steelworkers Union has also objected, fearing job losses; Nippon officials have said they will honor existing labor agreements.

Former President Donald J. Trump, the likely Republican presidential nominee, told reporters last month that he would block the sale “immediately” if he were in office.

White House officials have indicated that the administration is reviewing the acquisition, a process that could see Mr. Biden block the deal.

Lael Brainard, chairman of Biden's National Economic Council, suggested in a written statement shortly after the deal was announced that the merger would likely come under scrutiny by the Committee on Foreign Investment in the United States, known as CFIUS and is headed by the Minister of Finance.

Government officials have declined to confirm that an investigation is underway.

“CFIUS is committed to taking all necessary actions within its authority to protect U.S. national security,” Treasury Department spokesperson Megan Apper said this week. “Consistent with law and practice, CFIUS does not comment publicly on transactions it does or does not review.”

When asked about the merger by reporters last month, Ms. Brainard said Mr. Biden “remains a strong believer in steel being an important industry as the backbone of the transformation that we are driving in the economy, in terms of the energy transition. advanced manufacturing infrastructure” and national security.

Environmental groups say the deal could hinder that energy transition. If the deal goes through, these groups say, emissions from US Steel's coal-fired power plants could remain much higher than if the company were sold to another buyer — one more committed to electrification and other advanced technologies. emission-reducing technologies.

Both Nippon and US Steel aims to effectively stop releasing heat-trapping agents into the atmosphere by 2050, a goal known as “net zero,” largely by relying on technologies they have not yet developed or scaled up. Environmental groups have pushed for more ambitious and concrete measures.

“Their ambitions are very modest,” Yong Kwon, senior policy adviser at the Sierra Club's Living Economy program, said in an interview.

Mr. Kwon said environmental groups were concerned that neither Nippon nor US Steel would retire the coal-fired blast furnaces anytime soon and were raising the issue with lawmakers and the government.

“What is important is that we have a steel industry that is committed to making the transitions that will both improve the steelmaking process domestically, preserve jobs, grow domestically and also reduce the damage to public health currently caused by this steel is caused to a minimum. industries,” he said. “The best we can do is make sure the government understands that – and its wider importance for the green transition it wants to achieve.”

Executives at Nippon, based in Japan, and US Steel, based in Pittsburgh, say they are spending money to pursue multiple strategies to reduce emissions, including efforts to do so. That includes US Steel's partnerships with universities and the Energy Department in efforts to capture and store emissions from coal-fired power plants.

Some CFIUS experts say it would be a tall order for the government to block the sale of a U.S. company, on largely economic grounds, to a competitor of a strong U.S. ally such as Japan.

Blocking sales over climate concerns would pose an even bigger hurdle, a reality even some environmentalists admit. The law, which establishes CFIUS' analyzes of the risks of a sale to a foreign-owned company, directs the review to consider “an assessment of the threat, vulnerabilities, and national security implications associated with the transaction.”

Some analysts critical of Nippon Steel's climate commitments say the proposed sale could otherwise benefit American workers, injecting Japanese knowledge and capital into a company that often struggles to compete despite decades of support from the federal government.

“US Steel is, frankly, a bit of an older, underinvested and dilapidated company,” said Chris Bataille, a researcher at Columbia University's Center on Global Energy Policy. “If you look at global steel companies and you're not worried about carbon, Nippon Steel coming in and investing in US Steel and helping bring its technology back to world-class levels” would be good for the company.

But he added: “Nippon is just – they're not that committed to the climate.”

Other analysts say the deal could backfire on American workers because it would leave US Steel without incentive to compete in a growing global market for so-called green steel, which is produced without fossil fuels. They say such a failure could ultimately jeopardize U.S. manufacturing and employment.

“They have no immediate plans to clean up their coal-based facilities, which are those blast furnaces, and that's on a 2030 timeline,” said Hilary Lewis, steel director at Industrious Labs. She said: “2030 is not that soon, and even if you look at their 2050 timeline, they are falling short of the investments I think they should be making today.”

“It's not just about missing an opportunity,” Ms Lewis said. “It's about the journey of these companies and making sure they're ready for the next century.”