Steel is one of the industrial sectors under intense pressure to cut greenhouse gas emissions. By its very nature, producing steel consumes a lot of energy, which in turn produces a lot of carbon dioxide. But it's not as bleak as all that: the steel industry has been trying for decades to find ways to cut CO2 emissions, says Michel Wurth, a member of the management board of ArcelorMittal, the world's largest steel maker.

A little-known fact about steel is the rate at which it is recycled: at ArcelorMittal, 40 percent of the steel the company produces is recycled. Steel is endlessly recycled throughout the scrap route, Wurth says, speaking at the European Business Summit in Brussels. It's an almost perfect material from an environmental point of view.

One of the major ways a steel company like ArcelorMittal is looking to slash its emissions is to reduce the 'energy intensity' of the production process, something ArcelorMittal has been actively focusing on for a long time. Optimising energy is a major issue in our investment decisions, Wurth says. Since 1990, the company has boosted energy efficiency by 20 per cent.

Having said that, the company notes its has scope to improve the energy efficiency of some of its plants, especially in fast-growing developing markets that represent about half of the company's worldwide production. In some emerging markets where we acquired (facilities), there is still a lot to do to move forward and improve, he says.

The best way forward to making major progress in curbing emissions, Wurth believes, lies in a global agreement for the steel industry. The logic is simple: 90 per cent of all steel produced worldwide comes from 10 EU countries. The major producers would agree to a baseline measurement of emissions, to which companies could benchmark performance. Such a system would provide a powerful incentive for companies to boost efficiency, he reckons.

While ArcelorMittal is a member of the European Union emissions trading scheme, Wurth believes the system- due to start-up problems when the EU doled out too many credits to companies and is now fine-tuning the system- has yet to reap major benefits. The system works this way: a limit is set on the amount of pollution a company can emit, and firms are issued permits, equivalent to credits representing the right to emit a certain amount. These credits can be bought and sold in an open market.

The biggest merit of this policy instrument is to make actors see carbon emissions have a cost ... when you drive your car, or when you make steel, on a global basis, Wurth says. This will be a global solution, but we are not there yet, he adds.

Looking ahead, ArcelorMittal is looking into how it can make lighter steel - and sees this as the boldest way forward to reducing CO2 emissions - provided the European Commission creates incentives to develop new processes and new steel grades.

At the same time, the EU is examining ways to ensure energy-intense sectors such as steel remain competitive, while still meeting climate change goals. But more clarity is needed in these policies, to be unveiled by 2010 at the earliest. Otherwise, Wurth warns, companies in Europe will lag behind their competitors in other regions in terms of investment. What is more, the costs could make European cars and machinery more expensive too.

The global view by our company is that we have to be proactive, Wurth says. We believe steel should be part of the solution, not part of the problem.