President Biden is facing new pressure to block Nippon Steel’s acquisition of the iconic manufacturer U.S. Steel, this time from environmental groups that say the tie-up would set back America’s efforts to curb climate change.
In interviews, environmental activists working to reduce greenhouse gas emissions say the merger would bring together two steel giants that are laggards on transitioning away from fossil fuels.
Researchers at Industrious Labs, a nonprofit pushing to decarbonize steel and other heavy industries, drew on both companies’ public disclosures to calculate that Nippon and U.S. Steel are relatively high emitters of heat-trapping gases from steel production. Both companies rely heavily on coal-powered blast furnaces and are on a slower path to transition to cleaner fuels than some international competitors. Three U.S. Steel facilities — in Pennsylvania, Indiana and Illinois — combine to emit more greenhouse gases in a year than a comparable number of coal-fired power plants, the researchers estimate.
Officials from Nippon and U.S. Steel say they are pursuing multiple strategies to decarbonize by 2050, including high-grade steel production in more efficient electric-powered furnaces and using hydrogen-injecting technology in blast furnaces, and that their merger will advance those efforts.
In a joint statement on Thursday, the companies said that the deal would “create a stronger, more competitive global company” and that Nippon and U.S. Steel “recognize that solving sustainability challenges is a fundamental pillar of a steelmaker’s existence and growth.”
Concerns about the climate implications of the deal add to growing political backlash over the proposed takeover. A bipartisan group of senators, including the Republicans Josh Hawley of Missouri and Marco Rubio of Florida and the Democrats Sherrod Brown of Ohio and Bob Casey of Pennsylvania, has urged the administration to scrutinize and stop the takeover.
The lawmakers cite potential damage to American workers and to the nation’s defense industrial base if Nippon were to close some of U.S. Steel’s American 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 “instantaneously” if he were in office.
White House officials have indicated that the administration is reviewing the acquisition, a process that could allow Mr. Biden to block the deal.
Lael Brainard, who heads Mr. Biden’s National Economic Council, suggested in a written statement shortly after the deal was announced that the merger would probably be scrutinized by the Committee on Foreign Investment in the United States, which is known as CFIUS and headed by the Treasury secretary.
Administration officials have refused to confirm that a review is underway.
“CFIUS is committed to taking all necessary actions within its authority to safeguard U.S. national security,” Megan Apper, a Treasury spokesperson, said this week. “Consistent with law and practice, CFIUS does not publicly comment on transactions that it may or may not be reviewing.”
Asked by reporters last month about the merger, Ms. Brainard said Mr. Biden “continues to believe very strongly that steel is an important industry as the backbone of the transformation that we’re driving in the economy, in terms of the energy transition, advanced manufacturing infrastructure” and national security.
Environmental groups say the agreement could hinder that energy transition. If the deal is allowed to go forward, those groups say, it could keep emissions much higher at U.S. Steel’s coal-powered plants than they would be if the company were sold to a different buyer — one that is more committed to electrification and other advanced emissions-reducing technologies.
Both Nippon and U.S. Steel are aiming to effectively stop releasing heat-trapping assets into the atmosphere by 2050, a goal known as “net zero,” largely by relying on technologies they have not yet developed or scaled. Environmental groups have pushed for more ambitious and concrete action.
“Their ambitions are very modest,” Yong Kwon, a 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 U.S. Steel appeared likely to retire coal-fired blast furnaces anytime soon and were raising that issue with lawmakers and the administration.
“What is important is that we have a steel industry that is committed to making the transitions that will both improve the steel-making process domestically, maintain jobs, grow jobs domestically and also minimize the public health harms that are currently being committed by these steel industries,” he said. “The best that we can do is to make sure that the government understands that — and its wider importance to the green transition that it has set out to accomplish.”
Executives at Nippon, based in Japan, and U.S. Steel, based in Pittsburgh, say they are spending money to pursue multiple strategies to reduce emissions, including trying to. That includes U.S. Steel’s partnerships with universities and the Energy Department on efforts to capture and store the emissions from coal-powered plants.
Some CFIUS experts say it would be a stretch for the administration to block the sale of an American company, on essentially economic grounds, to a competitor from a strong United States ally like Japan.
Blocking the sale over climate concerns would represent an even bigger hurdle, a reality that even some environmental activists concede. The law establishing CFIUS’s analyses of the risks of a sale to a foreign-owned company directs the review to consider “an assessment of the threat, vulnerabilities and consequences to national security related to the transaction.”
Some analysts who are critical of Nippon Steel’s climate commitments say the proposed sale could otherwise benefit American workers, by injecting Japanese know-how and capital into a company that has often struggled to compete despite decades of federal government assistance.
“U.S. Steel is a bit of an older, underinvested, run-down company, to be honest,” said Chris Bataille, a researcher at Columbia University’s Center on Global Energy Policy. “When you look at global steel companies, if you’re not concerned about carbon, Nippon Steel coming in and investing in U.S. Steel and helping bring its technology back up to world-best” would be good for the company.
But, he added, “Nippon is just — they’re not that committed to climate.”
Other analysts say the deal could backfire on American workers by not prodding U.S. Steel to compete in a growing global market for so-called green steel, which is produced without fossil fuels. They say such a failure could eventually jeopardize American production and jobs.
“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, the steel director at Industrious Labs. She said that “2030 is not that soon, and even when you look at their 2050 timeline, they’re falling short of investments that I think they should be making today.”
“It’s not just about missing out on an opportunity,” Ms. Lewis said. “It’s about the trajectory of these companies and making sure that they’re fit for the next century.”