The Government has announced a bold new ambition to have half of Britain’s steel requirements produced at home. To achieve this, all imports beyond that quota will be subject to a tariff of 50%. It’s been at least 15 years since domestic production was sufficient for half the country’s needs, and imports have accounted for the lion’s share ever since — other than a brief blip during Covid. Currently, around 70% of the steel used each year in the UK comes from overseas.

But there’s a significant question mark over this policy: has anybody asked Ed Miliband? Steel production is one of the most energy-hungry and carbon-intensive types of manufacturing there is. It’s no coincidence that Britain’s crude steel output has shrunk by nearly three-quarters since the Climate Change Act was introduced during Miliband’s previous stint in Government in 2008. Production fell from around 13.5 million tons in 2008 to 4 million tons in 2024. There has been a steady drumbeat of closures in the years since; plants in Rotherham, Sheffield, Redcar and Port Talbot have gone, along with many thousands of jobs.

For each ton of steel produced by the traditional blast furnace and basic oxygen furnace (BF-BOF) method in the UK, roughly two tons of carbon dioxide are emitted, which is slightly below the global average. Subject to allocations under the emissions trading scheme, producers must pay between £95-99 per ton of steel in carbon penalties. This is in addition to the energy costs to produce the steel. The BF-BOF method mainly uses coal, with some electricity.

The alternative is to use an electric arc furnace to recycle old steel, which is far more energy-efficient and produces far less carbon dioxide. However, this process almost entirely relies on electricity, which has increased by over 150% since 2008 for major industrial consumers. For major industrial users, electricity is many times more expensive than coal per kilowatt hour, even with the far higher efficiency of electricity factored in. Some of the world’s most punishing carbon prices combined with some of its highest commercial electricity prices have been a double-blow to British steel production, particularly since the sector has been up against competition unburdened by either problem.

Total UK steel demand is around 9 million tons a year, so to hit the Government’s target of 50% from domestic producers, one of two things must happen. Either British manufacturers must produce somewhere in the order of 1.5 million tons more steel than they did last year, or the country must reduce its consumption of steel by the same volume. Given that a tariff will apply to imports beyond the quota, prices will go up one way or the other. Steel users must either pay the tariff or buy more expensive homemade steel. It therefore seems reasonable to suggest that if the Government does meet its ambition, it will be by securing a larger slice of a smaller pie.

This would mean steel-consuming industry closing or moving overseas, which would be in line with Britain’s general approach to commercial energy policy since 2008. The balance of supply and demand in the national energy system is becoming increasingly tight, as we move toward electrification at the same time as relying on intermittent renewables. Reliable electricity generation will continue to retire over the years ahead, just as electric vehicles, heat pumps and AI data all start demanding power from the grid.

The very last thing Miliband could do with at this point is a load of power-hungry electric arc furnaces being installed. Thankfully for him, what is likely to happen instead is that other forms of industry leave the country, as Britain adds high steel prices to its already dire business environment for manufacturers.

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Chris Bayliss is an independent consultant who works on energy infrastructure in the Middle East.

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